Mortgages for very small amounts??

Random

Hi, with the latest rate cut, I thought it was time to ring my bank and double check when my fixed rate ended, and what other deals were available, in case it paid to switch sooner. What I learned was, as my mortgage is now below £15k, and their new minimum is £25,000, they would no longer be able to offer me ANY kind of deal in the future! That means, when my fixed rate (at 6.89%, sigh, I always fix at the wrong moment!) runs out, I'll be stuck on the standard rate for the next 15 years! Also, they're calculating interest on a yearly basis still, and the only way to change this is to take out a new mortgage, which they won't give me, as I don't owe enough!

The only option I have is to change the term, but I can't quite stretch to that at the 6.89% rate I don't think. I can possibly do it when it expires, at a lower rate, but if I can't fix again in future, I run the risk of higher repayments when interest rates increase again.

Are there any companies out there that would offer me such a low mortgage? The thought of 15 years on a variable rate and no point in overpaying because the interest is only calculated yearly seems really depressing! My bank's only advice was maybe I could pile all my other debts into my mortgage, no thanks! I said, I don't have any, as you can see, I'm the kind of person who likes to pay off everything they possibly can!

Does this happen to everyone with an older mortgage? I know mine is exceptionally small, but it seems ridiculous, in the current climate, that my only option is to borrow more money I don't need, just to get a better deal.

feisty1

You will have other options ie a personal loan, an independent (not bank) adviser will keep you right

Random

Wouldn't a personal loan have a higher rate than even the standard variable mortgage rate though?

feisty1

if u have such a small mortgage why do u have it spread over 15yrs? do u realise the interest u will be paying over 15yrs? if it is due to affordability then i understand.
Yr options are find another lender and the costs invoved there, stay on svr, which is variable or take a personal loan

HappyMJ

the fees alone would swallow any small amount saved on interest. so don't bother. you're only paying £1,000 per year interest. if, as you said you like to pay off everything you can then do that and never worry again.

TighterThanTwoCoatsOfPain

The difference is seriously minimum..

15k over 15 years @ 6.89% = £133pm
15k over 15 years @ 4% = £111pm.

If thats all you can afford each month anyway, i have to say you probably wouldnt get a decent rate on a mortgage anyway if you're sub prime... nothing even approaching 4% anyway.

Random

If I could have got my bank to calculate interest monthly not yearly, I would've probably carried on paying the existing payment or a little more, and let the extra go towards paying it off. I just don't feel it is worth it when they keep the money all year but charge me interest on it too!

I don't know if I'd be considered sub prime or not? My income is very low yes, but my mortgage is tiny, on a two bed house with a decent sized garden, and I think my credit history would be ok, as I make all payments on time, and always have done.

The fees normally are too high to consider switching elsewhere, my bank used to make me an offer every time my fixed rate ends for a new one, with no fee. It isn't as good as one you pay fees on, but they agreed there was no point paying because I owe so little. Seems, from what I was told, this probably won't happen in future.

I am actually about 10 years into a 25 year mortgage, that's why 15 years. Actually, I seem to have gained an extra year or two somewhere, probably when I switched banks some years ago and wasn't so knowing as I am now. I'd quite like to get those years back, and some! The mortgage was fairly low anyway, and my old bank paid me off for my endowment, which I put into the mortgage to reduce it more.

My payments at the moment aren't terribly stretching, but I think if I switched to 10 years on this fixed rate, they might be a little bit. I was looking at a 10 year fix at just over 5% which had repayments of £160 for £15k over 10 years, which I reckon I could manage, not sure how much more it would be at 6.89? Is there a handy calculator somewhere I can feed percentages into?

Basically, I want the debt paid as soon as possible so the house is mine and always will be, but without overstretching myself and getting into trouble. I certainly don't want to load any more debt onto it, like the bank wants.

Random

Actually, I just found a calculator, and it would be less than £170 a month. I really should give that serious consideration, as it can be done even in my fixed rate, has a smaller fee than switching and would save me 5 years. I'll have to do my sums and see if I can run to that every month.

DawnW

Can't you keep the mortgage term as it is 'officially' and overpay? This is what I am doing. Obviously you will need to check the T&C and / or ask the lender if this would be allowed at all, or if you are allowed to do so without financial penalty. Many seem to allow 10% overpayment per year within the fixed period, some more (or less) than that. Just ring them up and ask what their specific rules are. By doing this you will pay it off sooner anyway, and it won't stretch your affordability as you can choose (ERCs permitting) how much you overpay per month or whatever. Why not check out the Mortgage free board for some ideas?

Random

This sounds silly, as it doesn't really make much difference cash wise whether I reduce the term or overpay, but I resent paying them extra each month when they only calculate my interest yearly! I suppose I really ought to get over this, as it would be better for me to pay more, regardless!

I couldn't save up and repay once a year, as something would always turn up and the money would vanish. If I was paying it monthly, I'd never have it to spend and it wouldn't be wasted. I really should've asked to switch to monthly interest when I was switched to full repayment.

feisty1

The reason I posted re yr interest over 15yrs was the term not the rates
If yr paying over a longer term yr going to pay more in total eg
14.5k over 15yrs approx 22/23k
14.5k over 8yrs approx 17k