Mortgage advice please?!

unhappyrainbow

Any advice would be great thanks!

We currently owe 101k on our mortgage with northern rock and our house is currently valued at 120k. We are looking to move to a bigger house in the summer when the market picks up. Our current payments are £577.00 a month with northern rock fixed at 5.79%. This end on 1st March 09.

I now have a few options. Should i move onto another fixed rate or slip onto Northern rocks variable of 5.09%?

The problem i have is that my wife has been registered disabled and now recieves DLA. I am not sure how many lenders accept DLA as an income.

Cheltenham and Gloucester currently have a mortgage that does accept DLA as an income but it is fixed for 2 years at 6.14%!

Any advice on what to do for the near future would be great thanks!

My mortgage advisor said to move to the C & G mortgage but i think he said that as he works on commission?

Cheers

Rainbow

Tiddler_2

In my opinion there's a few things to affect what you do.

Are you definately moving house (market is not likely to pick up this year IMO)?

How much deposit will you have to put down on the new property? Maximum mortgage currently available in England/Scotland/Wales is 90% for existing N Rock customers, and very few lenders even at this level.

If you don't move house then your LTV on your current property may increase if the anticipated fall in house values continues, so whilst SVR may be cheaper at the moment if/when rates start to go up, you may not have the option to get a deal elsewhere.

There may be cheaper rates available than the C&G deal quoted, but do the arrangement fees being charged mean that the total cost is higher than the 6.14% deal quoted?

unhappyrainbow

Thanks Tiddler.

We are not definately moving but we have just had our second (and last) child and they are sharing a room. If we sell our house for 120 we will have 18k equity to put down, take off legal fee's etc probably 16 - 17k.

Sorry to sound silly but can you explain what you mean in the LTV paragraph?

There were better mortgage deals than the C&G one but like you say they have silly amounts on thier arrangement fee's.

I don't see anything wrong with slipping onto northern rocks SVR but my mortgage advisor said to go with the C&G. Am i missing something?

hardworking_bob

Loan To Value is important as the best current mortgage deals on say a fixed rate for example tend to be where a 40% deposit is available. Therefore you have to consider what % your £16K deposit will have on the overall LTV. I've seen a few deals coming in recently for mortgages where the LTV is 75% (which is encouraging)!

I've a fixed rate with Abbey at -5.84% currently. However the SVR with Abbey is -4.94%. Hopefully, we will see more competitive deals coming in...Good Luck.

Tiddler_2

You're welcome..

The LTV (Loan to Value) paragraph refers to the risk the mortgage is to the lender. At the moment you owe approx 84% of the value of your property (101/120 x 100) so you're able to choose from deals available for people with such a level of risk.

If you wait a while and house prices go down then your outstanding balance will be a higher proportion of the house value - meaning the rates will be higher, and the options fewer. So whilst you qualify for that deal with C&G at the moment in a few months time you may not.

Whether switching to a fixed rate or staying on the Northern Rock SVR is right for you comes down to whether you are prepared to take a risk on rates increasing.