Advice on mortgage please

---lee---

My mortgage redemption penalty period ends this January. I’m with the Cheshire and they sent me an illustration with a number of different options for what I can do with the mortgage in January. If I don’t do anything, it reverts to their standard rate of 6.54%.

I’m a bit peeved though as I’ve noticed that their so called ‘Loyalty’ rates for customers with an existing mortgage with them are more than both the remortgage and first time buyer deals for new customers.

For comparison, here are the rates they are offering for a 3 year discount mortgage:

4.36% for new first time buyers
4.48% for remortgage
4.99% Loyalty

In January, I will have been with Cheshire for 5 years and have a 20 year term remaining on just under £73k with approx £130k equity. I have no problems with credit and have always made all my repayments on time.

I know there’s not a massive difference between the rates, but I don’t see why they should be making any more money out of me than necessary.

I wrote to them a few weeks ago to see if I could get a better deal, but they just had some kid call me to tell me that they had two new fixed rate products that I might be interested in (no chance). I had asked for all administrative fees associated with taking my mortgage elsewhere and as they have not replied to me, I have written again.

I would really like some opinions on if it’s worth staying (if I can get a better rate) or if it’s time to ditch them. Anyone else been through this with Cheshire?

Thanks,

Lee.

stanmoresaver

If you think about it commercially then what they (and nearly all the lenders) are doing is offering a rate that they hope you will say is worth having to save you going through the "perceived" hastle of remortgaging away from them. This is a rate that they will make money on as this is what they are in business for.

Consult a whole of market mortgage broker to discuss your options, he should, without charge be able to show you a remortgage calculator which will clearly show you your best option. One point to be aware of, if your mortgage is interest only then you are more likely to be better off changing the deal than if you are in the later stages of a repayment mortgage so if you have a repayment mortgage ask to see the section of the KFI that shows the balance reducing.

Hope this helps.

---lee---

stanmoresaver wrote:

One point to be aware of, if your mortgage is interest only then you are more likely to be better off changing the deal than if you are in the later stages of a repayment mortgage so if you have a repayment mortgage ask to see the section of the KFI that shows the balance reducing.
Hope this helps.

Hi,

Thanks for your advise. It's a repayment mortgage entering the 6th year of a 25 year term.

Cheers,

Lee.

stanmoresaver

Obvious and simple statement to make here!

Make sure you look at like for like amd get a 19 year term

Suggest a daily interest product- a tracker with the best (smallest) long term mark up on BBR as this could be the last chance to profitably remortgage unless you plan to move.

---lee---

stanmoresaver wrote:

Obvious and simple statement to make here!

Make sure you look at like for like amd get a 19 year term

Suggest a daily interest product- a tracker with the best (smallest) long term mark up on BBR as this could be the last chance to profitably remortgage unless you plan to move.

Thanks for the quick reply. My statement was a bit misleading. What I should have said is that in January, I will be starting the 6th year of a 25 year term.

Your point is very valid as I may still be looking by January and would not have thought to reduce it by another year.

I'm interested in what you mean by last chance to profitably remortgage (I don't plan to move).

Thanks,

Lee.

---lee---

---lee--- wrote:

Thanks for the quick reply. My statement was a bit misleading. What I should have said is that in January, I will be starting the 6th year of a 25 year term.

Your point is very valid as I may still be looking by January and would not have thought to reduce it by another year.

I'm interested in what you mean by last chance to profitably remortgage (I don't plan to move).

Thanks,

Lee.

Bump :rudolf:

---lee---

---lee--- wrote:

Thanks for the quick reply. My statement was a bit misleading. What I should have said is that in January, I will be starting the 6th year of a 25 year term.

Your point is very valid as I may still be looking by January and would not have thought to reduce it by another year.

I'm interested in what you mean by last chance to profitably remortgage (I don't plan to move).

Thanks,

Lee.

stanmoresaver, I'm curious at what you mean by this (last chance to profitably remortgage). Maybe I'm thick, but what this means is not obvious to me.

I’ve not decided if I will consult a broker or not, but in the meantime, I would like to know what your talking about.

Any chance that you can explain your response?

stanmoresaver

Simply speaking, the extra amount of money paid over the interest payment within the monthly payment does not propotionately reduce the capital outstanding, rather, especially in the early days, makes an advance payment of the interest to be paid over the life of the loan.

Example (not accurate!!)
Repayment mortgage Monthly payment £600, interest on loan £400, therefore £200 extra cost. However outstanding capital does not reduce by £200 pm.

Therefore, if you continually remortgage you never get to the point where the capital repaid is at or greater than the extra payment.

When you remortgage (and importantly keep the term of the loan to coincide with the previous mortgage) then there will come a time when you don't actually save any money monthly because this is factored in by the lenders. So, as I said, There comes a time when you should say "this is my last one" and go for as low as is available long term rate, normally a tracker

Hope this helps

MortgageGenie

Hi Lee, Stan,

Sorry to jump in, I'm just not sure I'm reading your posts correctly?

Why would you want to use 19 years? if you're coming to the end of the 5th year and not yet entered the 6th you still have 20 years remaining.

Stan I don't understand why you say:

stanmoresaver wrote:

Example (not accurate!!)
Repayment mortgage Monthly payment £600, interest on loan £400, therefore £200 extra cost. However outstanding capital does not reduce by £200 pm.

If a mortgage is on daily/monthly interest then, using your example, the outstanding mortgage balance would go down by £200 in the first month but then by slightly more than £200 in month 2 etc...

---lee---

Thanks for your reply stanmoresaver.

Yes, that does make sense.

I've written to Cheshire (again), so I'll wait and see what they come back with (if anything).

Cheers.

stanmoresaver

No problem,

FYI, if you decide this is your last one then you should not be looking at any more than BBR +0.5% for the life of the loan.