Help please

Pink_fluff

Hello

I recently got my fist mortgage. It's a 95% mortgage, 5 year fixed rate.

I am pretty new to all this.... I'm looking for a bit of advice on what to do when the 5 years is up.

What happens? Obviously I need to find a new mortgage, but do I need a large deposit again, or does it work differently to that?

Hope someone can help!

Thanks

Leon_W

It really is pointless worrying about it.

You've got your fixed rate for 5 years and the whole world will be a completely different place at the end of it. Start looking at your options about 6 mnths before it ends.

With a bit of luck your house may be worth more than it is now so if it goes up 5% over those 5 years you'll be looking at a 90% remortgage therefore no need for another deposit.

Conversely, if your house goes down in value you'll fall onto your lenders Standard Variable Rate (deal dependent) which could be absolutely anything, so as I say, be content that you know exactly how much your paying each month for the next 5 years.

Regards

Tom_Kelly

In 5 years time you will be offered a new deal by your existing lender. This will happen a couple of months before the 5 years are up. You can choose to accept this offer or see if you can get a better offer from a new lender. If you can find a better deal then you can change your lender. This is called a remortgage.
Assuming the property value has not altered, your outstanding mortgage will be the same amount if you have an interest only mortgage now and it will be a little less if you have a repayment mortgage. You would then be applying for a remortgage of around 95% once again.
If your property has increased in value then you would need a remortage for less than 95% of the value. If the property value has fallen then you would need to borrow more than 95% of it's value in order to repay the original loan.
The legal costs of a remortgage will be less than the costs for a purchase. Any other costs are dependant upon the lender at the time.

Pink_fluff

I know I have the next 5 years to be worry free. I was simply asking out of curiosity!! I just didn't understand how it all worked. thanks for your help guys.

Gorgeous_George

You will be able to:

> Do nothing. Stick with the SVR after 5 years. No fees.

> Change mortgage with current lender. Potential fees.

> Change mortgage to a new lender. Potential fees.

When the time comes, look at the fees and the rates on offer and make your choice.

GG

herbiesjp

When you come to re-mortgage the deals available will be based on the property value at the time and mortgage amount at the time. So no deposit needed as such, unless you want to reduce the mortgage amount in order to get a better deal

Currently the better deals are sub 75% or lower, so you can see what kind of ball park figure you neeed to be aiming for. Although as long as you can build up 90% equity you should still be able to find mortgage deals.

However who knows what the mortgage market will be like, and what products will be available - 100% mortgage deals were available earlier this year and now they are gone!

getmore4less

Pink_fluff wrote: »

Hello

I recently got my fist mortgage. It's a 95% mortgage, 5 year fixed rate.

I am pretty new to all this.... I'm looking for a bit of advice on what to do when the 5 years is up.

What happens? Obviously I need to find a new mortgage, but do I need a large deposit again, or does it work differently to that?

Hope someone can help!

Thanks

You do not need to do anything if the term of the loan is for more than 5 years.

Did you use an advisor for this loan or go direct to a lender?

As part of the deal it will tell you what happens to the interest rate after the fixed period is up, this is the default position you do nothing except pay the new amount for the full term of the mortgage(which I have asumed is not 5 years).

If you used an advisor you should have had this explained to you when you took out the loan because without this information how could you decide if the deal was the right deal for you?

At any time(full term not just the 5 years) you may find the deal you are on is not competative and want to change you can do this but there may be penalties this should have been explained also.

Pink_fluff

getmore4less wrote: »

You do not need to do anything if the term of the loan is for more than 5 years.

Did you use an advisor for this loan or go direct to a lender?

As part of the deal it will tell you what happens to the interest rate after the fixed period is up, this is the default position you do nothing except pay the new amount for the full term of the mortgage(which I have asumed is not 5 years).

If you used an advisor you should have had this explained to you when you took out the loan because without this information how could you decide if the deal was the right deal for you?

At any time(full term not just the 5 years) you may find the deal you are on is not competative and want to change you can do this but there may be penalties this should have been explained also.

Hi I went through an advisor. To be honest I don't ever remember discussing what would happen when the 5 year period was up. I've looked through the details from my lender and at the end of the 5 years, they put me onto some default interest rate, something like 7% :eek: So that is just as you said above. I decided that 5 yr fixed rate would be the best, as knowing what my monthly payments would be is important for me, as this is my 1st mortgage. Just a bit confused. I put down at £18000 deposit on my mortgage, so my main query is why when i 're-mortgage' does this change? I do not need a deposit to do this as long as the value of my house has not de-creased?

Thanks for all your help. The mortgage advisor did absolutely everything for me when I bought this house, so I probably don't know as much about mortgages as I really should. Cheers

Pink_fluff

Meant to add to last post, it is a 35 year mortgage.

getmore4less

Pink_fluff wrote: »

Hi I went through an advisor. To be honest I don't ever remember discussing what would happen when the 5 year period was up. I've looked through the details from my lender and at the end of the 5 years, they put me onto some default interest rate, something like 7% :eek: So that is just as you said above. I decided that 5 yr fixed rate would be the best, as knowing what my monthly payments would be is important for me, as this is my 1st mortgage. Just a bit confused. I put down at £18000 deposit on my mortgage, so my main query is why when i 're-mortgage' does this change? I do not need a deposit to do this as long as the value of my house has not de-creased?

Thanks for all your help. The mortgage advisor did absolutely everything for me when I bought this house, so I probably don't know as much about mortgages as I really should. Cheers

We never stop learnig about our own finances mortgages are just one part of that.

Most advisors seem to overlook the follow on rates when advising.

The £18k(5%) is only relevent today any future mortgage could be dependant on the future LTV requirements.

On a £360k house that could be an issue if prices drop or LTV requirements change, how easy would it be to find another £18k if either moved against you 5%

Your current lender will usualy allow you to take a new product without rechecking the LTV unless there is good reason to check(missed payment). the default for your current loan is the follow on rate which as long as you pay you are OK.

Any new lender will want to have a valuation so if your place is worth less you will not be able to get a new lendor(that could change in 5 years) you should have been advised of this potential issue.

You say the loan is 35 years, is this also interest only? if it is and this is a stretch I would think you have bought a place you cannot afford since it is dependant on too many things going in your favour over the next 5 years

In the mean time you do have 5 years to plan and a lot can change.

Pink_fluff

thanks getmore4less

It is a 35 year re-payment mortgage, I would never take an interest only mortagage. House was bought for £116,000 if that helps any.

What did you mean in your last post

"You say the loan is 35 years, is this also interest only? if it is and this is a stretch I would think you have bought a place you cannot afford since it is dependant on too many things going in your favour over the next 5 years"

too many things going in my favour over next 5 years? What does that mean!?

Thanks for all your help.