remortgaging

Blunda

Hello

My 2 year fixed rate will be up next year and I am looking for some advice on remortgaging.

Firstly we are with Northan Rock and we took out 100% mortgage to get on the property ladder, we actualy borrowed more than the price of the house so we could do some much needed work to it (The house was 122k and we borrowed 125k). Now with the house market in the state that it is in at the moment I am worrying about wether we can remortgage. If we were to remortgage next year and the property is less than the value we borrowed will we be able to remortgage? will the new mortgage providor refuse to take on the mortgage if the property is worth less than we borrowed? Also, how much should we expect to pay with the remortgage? because we are interest only im asuming we would have to pay a percentage of the mortgage when we do remortgage aswell?

Any help would be much apreciated

Thanks for your time

lisyloo

If we were to remortgage next year and the property is less than the value we borrowed will we be able to remortgage?

In the current climate you won't be able to get a 100%+ mortgage.

Do you actually have that or do you have a mortgage plus secured loan?
It's important because if it's the latter you might be able to move the mortgage only.

will the new mortgage providor refuse to take on the mortgage if the property is worth less than we borrowed?

If you have 100%+ mortgage then yes you will get refused.
I would suggest checking as lots of people took a mortgage + secured loan and that will affect the answer.

Also, how much should we expect to pay with the remortgage?

There will be some fees, that could be anythign between £500 and £2500 but you will have a choice on this.
The rate will likely increase a lot as well
AND you will have to make repyaments.

What are you doing with your disposable income right now?

because we are interest only

What's you plan to pay the mortgage back then?

im asuming we would have to pay a percentage of the mortgage when we do remortgage aswell?

No, but I think lenders are being much more cautious now, so you probably won't be able to continue on interest only.

So the question is.
How much spare income can you find, because with repayment AND rates going up you are going to have to find some extra money.

If you can say the amount of your loan, the rate and monthly payments then we'll be able to put some figures on it, but it could be quite a shock.
My mortgage is going up about £200 per month and we weren't interest only.

Blunda

I think it was a secure loan but cant be sure. Will contact my mortgage adviser, hopefully he will remember, although it was over a year ago now. Im assuming it will say in our mortgage papers anyway?

So they will refuse outright if it is 100%+? there would be no way round it?

At the moment all our disposable income is going toward our wedding which is the same month as our fixed rate is over.

lisyloo

Yes if you have paperwork it should say in there what you have.
My guess is that's most likely you have lower mortgage and secured loan.

So they will refuse outright if it is 100%+? there would be no way round it?

I'm not a broker, but my understanding is that 100%+ mortgages are no longer available.
There are probably ways round it, like taking an unsecured loan to pay off part of it and then getting a smaller mortgage, but there is a limit to how much you can get on an unsecured loan and it will likely be a higher rate, so you'd need to start running some maths to see whether it's worthwhile.

Whatever you do it's inevitable that you will be paying a lot more.
For example my rate is going to go from 4.64% to 5.99% so that adds about £200 per month to my mortgage.
You haven't said what rate you are on, but it's inevitable that your new rate will be higher EVEN I you remortgage, so I can say with almost 100% certainty that you are going to be paying more and possibly significantly more (several hundred per month).

At the moment all our disposable income is going toward our wedding which is the same month as our fixed rate is over.

That's good news, because presumably this money will then be available after your wedding because as I said, even if you do remortgae the costs are almost certain to be higher.
We can't put any more detail on the amount without figures but you won't get a rate that's much below 6% at the moment, so if you are on 4.5%-5% then that's at least a 1% increase.

Blunda

I just had a thought. If we were to increase the price of the property to over the amount we borrowed (25k) would this help us in anyway?

If it is a mortgage+loan and we can move just the mortgage, would there be issues if the propery is still less than the current mortgage? would the ne mortgage provider refuse us? as we wont be able to get 100% mortgage would we be left to pay the 5% or so they wont pay?

lisyloo

If we were to increase the price of the property to over the amount we borrowed (25k) would this help us in anyway?

If you mean, you just state a bigger number, then no.
Any new lender will do a valuation and they will decide, it won't matter what number you state.
For info the valuation I have just had is 7% off peak price.
You could check a site like https://www.nethouseprices.co.uk for your postcode and see if any similar houses have sold nearby and then apply a deduction.

So, no you can't just make up a bigger number.

If it is a mortgage+loan and we can move just the mortgage

This isn't as straightforward as it might sound.
I'm guessing you have a secured loan. This is cheap because it's secured on your property.
If you move the mortgage then your new lender will have the security of the home, so your secured loan will become unsecured and therefore more expensive.
I think I read somewhere that the rate would go from 7.5% to 15% but you'd need to check the figures.
You then need to run the maths to see whether the savings on the mortgage outstrip the extra you have to pay on the loan or investigate whether you can move the loan elsewhere.

would there be issues if the propery is still less than the current mortgage?

Yes.
No-one will lend you 100%+ of what a property is worth at the moment and there is no sign of that chaging short term.
It doesn't matter what figures you make up because the lender will value the property.

as we wont be able to get 100% mortgage would we be left to pay the 5% or so they wont pay?

I'm not a broker but my understanding is that the maximum you can expect is 90% of a cautious valuation (and price are falling all the time).
As I said my price is down 7% and that's out of date, so knock of 10% of what you think it's worth and then you can have 90% of that.
If you have savings and you can reduce the mortgage far enough that might solve your problem.

Have you considered simply staying with Northern Rock?
I suggest you work out the figures for this as then you know the worst case.

Tiddler_2

The mortgage will have been made up of a maximum 95% mortgage with the balance being an UNsecured loan. It could be a lower percentage mortgage but 95% was the maximum they will have offered.

The difficulty is that no-one offers this arrangement any more, and if you took the mortgage out 2 years ago, then your balance won't have reduced significantly.

Remortgages above 90% are few and far between at the moment and if they are available then they are more expensive than what you will have been used to (around 7.3 - 8% from memory) and will more than likely have Higher Lending Charges payable.

You can just repay the mortgage and keep the unsecured loan with Northern Rock but the rate on the loan will increase significantly to something around 15% - 17%.

You can't just make up a valuation for your property - the mortgage company will assess it based on the market at that time - but you could try over estimating the value on the application as you may have nothing to lose on a free valuation deal - but prepare to be disappointed.

With your rate being lower at the moment, it may be worth while overpaying by as much as possible for the last few months of this mortgage to try and get the balance down before the deal ends.

lisyloo

If you took the mortgage out 2 years ago, then your balance won't have reduced significantly

On an interest only mortgage, the balance will not have reduced at all.

Blunda

I Didnt mean just make up the value! I meant increase it by putting an extra bedroom in which is what we are planning to do.

It mite be cheaper for us to stay with northan rock then. Coz the only reason I can see to change is so we get another fixed rate deal. Adding up the extra interest on the secured loan and all the other costs of changing mortgage provider it may be just as expensive as sticking with our current mortgage.

I would assume that as we would no longer have a fix rate our mortgage payments would vary from month to month? Is the mortgage rate still going up?

lisyloo

I meant increase it by putting an extra bedroom in which is what we are planning to do.

It certainly is an option, but these things usually cost money, so you would have to weigh up how much it would improve the value as to how much you need to spend and whether you'd be better off reducing the mortgage with the money you'd spend.
Of course if you were planning on doing a lot of the work yourself then it might pay off, but in general you can't do everything yourself without any cost.

Coz the only reason I can see to change is so we get another fixed rate deal. Adding up the extra interest on the secured loan and all the other costs of changing mortgage provider it may be just as expensive as sticking with our current mortgage.

Exactly.
But you need to get figures and fees and run the maths to see what's best.
If you don't want to do that you could see a broker and get them to do the calculations for you but make sure you are aware of any up-front fees (you might want to find one that doesn't charge you a fee but takes commission from the lender).

I would assume that as we would no longer have a fix rate our mortgage payments would vary from month to month? Is the mortgage rate still going up?

Yes the rate could vary and that is a risk because NR can set the rate as they wish (I don't think it's tied to the BOE rate).

Currently the BOE rate is on hold but it could go up, stay the same or drop. I'm not sitting on the fence here, it really could go any way. The last vote we know about was split 3 ways.
My personal expectation is to hold for the next few months then we'll see sharp cuts.

A lot of economists are expecting cuts in 2009 in the BOE rate, but there is no guarantee of this or what NR will do. In this respect staying with NR is a risk, but it might be an option you need to consider.

What's the plan to pay off the mortgage longer term?

Toughluck

As tiddler said, you will not have had 125% secured lending. A proportion of it would have been secured against your house, either 90 or 95% of its purchase price back then.

2 options for you then. You MAY be able to re-mortgage the secured amount alone and keep the perosnal loan element. Trouble is the rates on new lending at 90 or 95% are higher and the perosnal loan element will have its interest rate move sky bound.

Secondly, as it was a 125% mortgage, I would just stay where you are for a very long time and wait for house prices to recover. You are not the first and will not be the last thread on here about "Together" mortgages and how people are basically unable to re-mortgage now.