Fixed Rate: My time's running out

gonnagetdebtfree

Okay - who's got the brains for a tricky, real-life moneysaving challenge?

In brief, in 7 months time our 'two year fixed rate' runs out.
We borrowed £120,000 on a 100% mortgage (remember those?!), at 5.95% from C&G. We will have prob. paid off about £5k by June, when it ends.

By my calculations that's 95.83% left to pay on the loan?

Factor II...

We also have 2 overdrafts totalling 2,800k (yes, I know, sorry!) that I'm trying to pay off, these both incur interest charges of 18% or so. One is the account I live out of, it's in the black for just a day a month when I get paid.

So I've got some decisions to make.

We currently have £150 spare a month. If we really push ourselves I could stretch that to 200 or even 300 with no treats whatsoever.

My 2 hard questions...

1) Where should this £150-£300 a month go?

- Should I put all or some into OVERPAYING the mortgage for the next 7 months?
At best I think I could only get the mortgage down to 94%. Is that worth it? There's only 90% mortages out there now anyway! ...so maybe I should concentrate on paying off the 2 overdrafts, and se free up cash to make the £100+ my mortgage will cost when I'm forced onto a variable rate of 6.5%+.

2) What if I'm in negative equity? Very plausible since we bought in 2007.
How will that effect things? Will I lose the house? How does it work?

Please help us moneysavers!

D

Locoblade

1) General advice is always pay the debts that are costing the most interest. Obviously its not always that simple but in your case unless you can get below 90% LTV, overpaying on the mortgage probably isn't going to help that much, and thats without considering if the house value drops further. If you have Excel, you could try downloading my mortgage spreadsheet (in sig) and seeing how overpaying the mortgage helps you, if nothing else it should at least give you a reasonable idea where you'll be in 7 months time so you can better make the choice.

2) You wont lose your house via negative equity, you just wont be able to change lender and won't be able to renegotiate a new deal with your existing lender, you'll be stuck on the SVR until you become positive again.

gonnagetdebtfree

Thank you,

It's such a pain that I won't be able to do a thrifty re-mortgage in June, I'll be stuck on a hefty basic variable until 90% is paid off, or more if I'm in Neg Eq.

Appreciate your thoughts.

dimbo61

I would really work at clearing the overdraft and hopefully have them cleared within the 7 months before your fixed rate ends.
This will give you the extra needed to pay the lenders SVR which might have come down a little with the cut in the BOE base rate.
Start saving on living expenses and look on all the other MSE boards
such as debt free, savings, gas & elec. etc GOOD LUCK NO TREATS !!!

gonnagetdebtfree

dimbo61 wrote: »

I would really work at clearing the overdraft and hopefully have them cleared within the 7 months before your fixed rate ends.
This will give you the extra needed to pay the lenders SVR which might have come down a little with the cut in the BOE base rate.
Start saving on living expenses and look on all the other MSE boards
such as debt free, savings, gas & elec. etc GOOD LUCK NO TREATS !!!

:T Thanks mate

Just called the bank, they value my house 5k less now.. eeeek.
No WAY I'm gonna get to own 10% value of house by June.
I guess my best bet is to get ready to pay the SVR - which tracks at 2% above the Bank of England base rate.

Soooo annoyed, I wanted to re-mortgage and be a moneysaver, can't see this happening for quite some time now! Until house prices rise and I can own more of the house.

Overdrafts it is!!!