worried about re-mortgage at the end of the year

joev

hi moneysavingexperts,

I hope you might be able to help in clearing up some questions/worries i have about what happens when i have to re-mortgage at the end of the year (november) when my 2 year fixed deal ends.

i currently have a rate of 4.9% which was based around the purchase of a 147,500 property with an interest only mortgage on 130,000 of that (17,500 deposit). i guess the good rate came from the ltv percentage. this results in mortgage payments of 640 pm which is pretty much all i can afford once ive paid a loan i have.

i think the property is probably currently worth 130k. and if it was still valued at that when it comes to november, the ltv will be awful.

im worried ill be stuck with remortgaging to an unpayably high rate

have i understood the way remortgaging works correctly? is this something to be worried about?

thanks in advance for any advice!

joe

beecher

I don't think you'll be able to remortgage with another lender, but your present lender will put you onto the Standard Variable Rate, or if you're really lucky a tracker. Check your original documentation to see what you go onto and if you're not sure what the SVR will be, post details of your lender and someone will tell you.

joev

im with alliance and leicester. when you say i wont be able to remortgage, is that because i wont be able to get another deal with that ltv, or is it that i am tied in in some way? thanks

_Andy_

joev wrote: »

im with alliance and leicester. when you say i wont be able to remortgage, is that because i wont be able to get another deal with that ltv, or is it that i am tied in in some way? thanks

Because of the LTV.

beecher

joev wrote: »

im with alliance and leicester. when you say i wont be able to remortgage, is that because i wont be able to get another deal with that ltv, or is it that i am tied in in some way? thanks

Your LTV is too high. The A&L SVR is 5.34% at the moment but it is impossible to say what it'll be by the end of the year. When does your loan finish? You have time to try to make savings in what you spend to be able to afford a slightly higher SVR - you could go on the debt free wannabee site.

But check your documentation - someone else will be able to tell you if it is A&L deals which sometimes end up on a tracker as I can't remember.

joev

what usually happens when payments get too high? is the sensible thing to do consider cutting my losses and selling up?

beecher

joev wrote: »

what usually happens when payments get too high? is the sensible thing to do consider cutting my losses and selling up?

The gamble for you is whether interest rates will begin to climb before house prices do. If you can't get a fix you're at their mercy as they increase. I'd look at alternatives first as you have several months to prepare. Take in a lodger/cut down on expenditure/get a second job. There's loads of help on these forums if you want help with more ideas - the Debt Free Wannabee subforum is the place to go for help.

joev

thanks for the advice guys. if i could trouble you with (another daft?) question...

if i manage to stay on the same mortgage and cope with the svr, does the current market value of the house come into play? or does i continue with the original loan on a different rate?

ive been considering a lodger for a while, ill definitely see what the going rate for room in my area is. beginning to wish i hadnt turned away so much contract coding work last year

thanks again

Joe_Bloggs

@joev
These are my views and I am not a mortgage adviser.

The FSA have some information on where Standard Variable Rate deals stand amongst other types of interest schemes here. These are only typical and you must check the terms and conditions as they apply to you.

As I see it, the current market value affects the Loan to Value Ratio. The lower the mortgage as a proportion of the value of the property then expect a lower interest rate for a lower loan to value ratio with a new mortgage deal.

This is of no consolation when your home is valued less than the amount of your mortgage. This is termed negative equity. It is difficult to get another mortgage and you may well be stuck with SVR until your house price is worth more than the mortgage or you pay off a significant part, or all of the mortgage.

Some lender's SVR rates are very competitive when compared with their fixed or tracker offerings. The Nationwide had to change their rules to stop fixed rate borrowers from switching to SVR.
J_B.

beecher

joev wrote: »

if i manage to stay on the same mortgage and cope with the svr, does the current market value of the house come into play? or does i continue with the original loan on a different rate?

You'll continue with the original loan - you're not changing deal, you're just going onto whatever you agreed to, ie the SVR. Many think interest rates will stay low for a while so you might be lucky . And who knows - you may be offered a new deal when yours comes to an end as no-one knows where we'll be by November.

Have you thought about how you're going to pay back the capital as you're only paying interest at the moment.

MORPH3US

Start saving damn fast and overpay / pay off a chunk of your mortgage...