Remortgage - have offer, but am unsure if it's the best option

blueberrypie

We are remortgaging, and have an offer from Barclays/Woolwich - 3.99% for one year, then onto a tracker of 1.99% above BBBR. I'm a bit concerned about predictions of interest rates rising at the end of next year (when we'd be moving onto the tracker product), and wondered if we'd be better to go for a fixed rate now? Our solicitor is already dealing with the remortgage, but we've not signed it yet. The offer is the same as the first one here - http://www.woolwich.co.uk/mortgages/compare-our-mortgages.html - except that we're not being charged an application fee.

We're borrowing £60k and the house has been valued (by the surveyor sent by Barclays) at £225k. We have taken the mortgage over 15 years, but are planning to overpay substantially, which is one of the reasons we went for this deal in the first place - the early repayment charge is 1% of the balance paid, and we can pay off up to 10% per year without any charge. Assuming partner is still in a job, we hope to have paid the mortgage off in full within the next four years.

Advice appreciated. TIA.

feisty1

quote: "we hope to have paid the mortgage off in full within the next four years

I think you have yr calculations wrong a 60k mortgage over 15yrs paying off 10% in yrs 1, 2, 3 & 4 would have an effect of

Total Saving on interest £7,856
Loan paid off in 8 years and 4 months

jawster

To be honest it doesn't look like a good deal to me and personally I would prefer their 3 year fix at 4.69% instead if I was in your situation.

Your locked in for 3 years anyway with your track and fix and your right, could potentially be on the tracker just at a time when rates are rising.
Even if rates return to just 3% by end of next year (which is still pretty low) you'll be paying 4.99% and then worrying for the final two years of your tie-in hoping it doesn't get higher.

If you have a strong plan to pay off the mortgage in just 4 years, I'd get a fixed product and just stick to that plan without worrying that rates will scupper the deadline.

Obviously different horses for courses so you should speak to a mortgage broker about this.

blueberrypie

feisty1 wrote: »

quote: "we hope to have paid the mortgage off in full within the next four years

I think you have yr calculations wrong a 60k mortgage over 15yrs paying off 10% in yrs 1, 2, 3 & 4 would have an effect of

Total Saving on interest £7,856
Loan paid off in 8 years and 4 months

No, I realise we'll be paying some early repayment charges with our plan to pay it off in full in four years. It's worth us doing this because the charges are so low (1%).

Alternatively we can pay the 10% each year and put the rest of what we have into savings, to be used to pay the balance at the end of the tie-in period, but we'd need to be getting a fairly good interest rate on our savings, so paying the 1% might be a better option. We'll continue to look at this as we go along.

blueberrypie

jawster wrote: »

To be honest it doesn't look like a good deal to me and personally I would prefer their 3 year fix at 4.69% instead if I was in your situation.

Your locked in for 3 years anyway with your track and fix and your right, could potentially be on the tracker just at a time when rates are rising.

There is a droplock facility on the mortgage, which is the reason we're still dithering. If rates go down in the next few months and then rise again, we could end up with an even lower interest rate than the 4.69%.

The other issue that on the fixed-rate deal, we'd be paying 3% rather than 1% on any early replayment (over the allowed 10%) - and I suspect we'd have to pay the application fee if we decided to go for that now, even though the credit searches and survey etc have been done.

I suppose that on a mortgage of this value it's not a huge difference, and perhaps I'm wasting time and energy wondering which way to go, and should just decide and get on with it *dithers some more*

caracal_77

blueberrypie wrote: »

We are remortgaging, and have an offer from Barclays/Woolwich - 3.99% for one year, then onto a tracker of 1.99% above BBBR. I'm a bit concerned about predictions of interest rates rising at the end of next year (when we'd be moving onto the tracker product), and wondered if we'd be better to go for a fixed rate now? Our solicitor is already dealing with the remortgage, but we've not signed it yet. The offer is the same as the first one here - http://www.woolwich.co.uk/mortgages/compare-our-mortgages.html - except that we're not being charged an application fee.

We're borrowing £60k and the house has been valued (by the surveyor sent by Barclays) at £225k. We have taken the mortgage over 15 years, but are planning to overpay substantially, which is one of the reasons we went for this deal in the first place - the early repayment charge is 1% of the balance paid, and we can pay off up to 10% per year without any charge. Assuming partner is still in a job, we hope to have paid the mortgage off in full within the next four years.

Advice appreciated. TIA.

What are you on now? SVR?
Might worth seating on SVR for now without any tie-ins until a suitable offer comes. Most SVR's aren't way off from the figures you're being offered.

blueberrypie

caracal_77 wrote: »

What are you on now? SVR?
Might worth seating on SVR for now without any tie-ins until a suitable offer comes. Most SVR's aren't way off from the figures you're being offered.

We're on a fixed rate - can't remember the figure but it's a fair bit higher. The mortgage was taken out in May 2005 with a 3-year discounted rate (now ended, obviously) but we stayed on it because we were waiting for an inheritance of £30k, which we are now using to reduce the mortgage. Also our current mortgage is self-cert, whereas the remortgage won't be (and was worked out on a very different LTV - we borrowed about 60% of the property value, whereas now we're borrowing about 25%).

caracal_77

blueberrypie wrote: »

We're on a fixed rate - can't remember the figure but it's a fair bit higher. The mortgage was taken out in May 2005 with a 3-year discounted rate (now ended, obviously) but we stayed on it because we were waiting for an inheritance of £30k, which we are now using to reduce the mortgage. Also our current mortgage is self-cert, whereas the remortgage won't be (and was worked out on a very different LTV - we borrowed about 60% of the property value, whereas now we're borrowing about 25%).

Are you sure you're on a fixed rate now? maybe SVR (after the initial discount period ended)? which bank/BS?

blueberrypie

caracal_77 wrote: »

Are you sure you're on a fixed rate now? maybe SVR (after the initial discount period ended)? which bank/BS?

You're absolutely right - I'm a bit brain-dead with Xmas preparations etc (six kids + Xmas = frazzled parent!) - we *were* on a fixed-rate, it's now SVR. Not a competitive rate though, and we'd end up paying too much in charges if we put that £30k into the mortgage without remortgaging.

feisty1

[quote=blueberrypie;16902387] quote: six kids + paying mortgage off in 4years quote]


You're a hero!

Pincher

I don't think I understanding your thinking at all.
If the goal is to accelerate repayment,
you shouldn't be getting a mortgage that penalises you for
paying as much as you want to.

Surely an offset mortgage is what you should go for?
By the way, someone told me his Woolwich mortgage that
was supposed to be offset against his Barclays bank account
does not offset at all, because the two IT systems are not linked.
I suspect you need to insist on having a Woolwich account running on
the Woolwich IT system for the offset to work.