10 year fixed rate - good or bad?

Marsie

Bestthingsinlifearefree wrote:

HI MARSIE,

CHECK THE REDEMPTION PENALTIES VERY VERY VERY CAREFULLY.

Ask your mortgae advisor / bank this question. If in 12 months after taking out the fix mortgage I needed to sell the house what redemption penalty would I pay ?

POST BACK HERE THE ANSWER.

Will ask tonight.

M.

Cath_S

I'm looking at the Nationwide 4.89% 10 year fixed deal. We have the mortgage with N'wide at the moment so we're looking to renew with the 10 year one. I like the N'wide because you can overpay by £500 pm and is portable. I'm off on maternity leave at the moment and the reason why I'm thinking of getting the 10 year deal is because I am probably going back to work part time. I know we can manage on my OH's wage but if I stopped working I wouldn't want to be reapplying for a mortgage every few years and being asked to prove my income when I don't have one and put the mortgage appilcation at risk.

Bestthingsinlifearefree

Marsie wrote:

Will ask tonight.

M.

Hi Marsie,

(they may tell you the mortgage is "portable" ie if you move to another house you can take it with you)......but that is not the question.

The question is: If I sold the house in one year e.g to go into rented accomondation, what would the redemption penalties be ? (ie if you did not take out another mortgage with them).

Maybe also ask the same question for 1 year 3 years and 5 years (as some time the redemption penalties are on a sliding scale).

Once we know what the penalties are we can advise you beter ie the risk / benefit of a low fixed IR mortgage versus the danger of extortionate redemption penalties.

ie we can then make an informed opinion. In the light of the redemption penalties verus the benefits of a fixed rate. Is it a risk worth taking ?

I look forward to getting the redemption penalties figure posted here.

dwsjarcmcd

Bestthingsinlifearefree wrote:

HI MARSIE,

CHECK THE REDEMPTION PENALTIES VERY VERY VERY CAREFULLY.

Ask your mortgae advisor / bank this question. If in 12 months after taking out the fix mortgage I needed to sell the house what redemption penalty would I pay ?

POST BACK HERE THE ANSWER.

With the Woolwich the mortgage will be portable, so the answer is going to be 'nothing' unless of course you decide to not buy anywhere (not going to happen) or downsize and have a smaller , or no mortgage (in which you will pay some or all of the charges) Again OP will know where they are within this cycle

Marsie

Early Repayment Charges. An early repayment charge applies if you want to repay the mortgage early. The charge is calculated using a loan amount of £140,424.00 and is based on:
5% of the outstanding loan if the mortgage is repaid within 7 years after the mortgage completes.
4% of the outstanding loan if the mortgage is repaid within 8 years after the mortgage completes.
3% of the outstanding loan if the mortgage is repaid within 9 years after the mortgage completes.
2% of the outstanding loan if the mortgage is repaid within 10 years after the mortgage completes.
In addition, a Redemption Administration Charge of £140.00 is also payable.
Based on the original amount borrowed, cash examples of the early repayment charges that could apply
would be:
£7,161.20 if the mortgage is repaid before 01/04/2013.
£5,756.96 if the mortgage is repaid before 01/04/2014.
£4,352.72 if the mortgage is repaid before 01/04/2015.
£2,948.48 if the mortgage is repaid before 01/04/2016.
Therefore the maximum charge you could pay would be £7,021.20 plus fees which are currently £140.00.
What happens if you move house?
If you move house, you may apply for a new mortgage on your new house with Norwich &
Peterborough for the same or lesser amount on similar terms to those set out in this illustration.
If the new loan is made simultaneously with repayment of this loan, you will not have to pay any early
repayment charge.
If the new loan is made within 6 months f repayment of this loan, you will have to pay any early
repayment charge set out in Section 10 although this will be refunded to you after completion of your
new loan.
If the new loan is smaller than this loan, any early repayment charge will be calculated as in Section 10
and will be based on the difference between the two loans.
Any special interest rate, for example, a fixed or discounted rate, will only apply for the remainder of
the original period for which it was offered to you or agreed with you and will subject to compliance with
all other terms of the mortgage offer on your new house.
This option is strictly subject to satisfactory security and your status continuing to be acceptable at the
time you wish to move.

Bestthingsinlifearefree

Cath_S wrote:

I'm looking at the Nationwide 4.89% 10 year fixed deal. We have the mortgage with N'wide at the moment so we're looking to renew with the 10 year one. I like the N'wide because you can overpay by £500 pm and is portable. I'm off on maternity leave at the moment and the reason why I'm thinking of getting the 10 year deal is because I am probably going back to work part time. I know we can manage on my OH's wage but if I stopped working I wouldn't want to be reapplying for a mortgage every few years and being asked to prove my income when I don't have one and put the mortgage appilcation at risk.

Hi Cath,

The portable bit is nice but irrelevant if you have to pay the mortgage of because e.g you are getting divorced or moving abroard or need to rent.....the portablity will not help you.

In that situation you will need to know what the redemption penalties will be in year 1 or year 5.

In an uncertain life to commit to being with that provider for 10 years is a big,big decision and reduces flexibility if your personal circumstances change.

Think about it do you know people who have got divorced in a 10 year period or had to move to a different part of the country or wanted to sell and rent.

Imagine if you had to do this,had to sell the house and pay off the mortgage and the bank said fine but you need to pay us 5K or 10K in redemption penalties.

Sorry to bang on about it but I want you guys to make an informed decison and truly know what you are getting into.

(just to let you know my situation I just took a 2 yr fix with Halifax at 4.99 and I felt nervous doing that as if I redeem the mortgage in yr 1 I have to pay 2% of the mortgage and 1% in yr 2 in penalties).

There is no way I would commit to a 5 year fix with redemption penalties as I feel confident I will be in that house in 24 months but who knows what my circumstance may be in 5 years.

stanmoresaver

This deal has a 4% (of the amount repaid) penalty during the fixed rate period.

(Well according to the product information emailed to me this morning)

Bestthingsinlifearefree

Hi Marsie,

The potrtability question is not relevant to many changes in circumstances.

I think the data you provided answers your question.

e.g lets say in 7 years from now you and your family decide to move abroard.

You will have to pay about £7000 pound in PENALTIES to redeem your mortgage !!!!!!!!!!!!!!!!!!!

Can ANY of us say in the next 7 years we wont need to move because of career, get divorced, want to rent etc etc.

Think about it.

Dont get me wrong I think fixed rates are a great thing but 7 years later after taking the mortgage getting whacked by those redemption penalties aint worth it.

What if IR drop to 2% in 3 years you are stuck paying 4.5% or whatever.

and cannot remortgage out of the deal ie change providersand are STUCK paying over the odds for 10 years UNLESS you pay massive redemption penalties.

dwsjarcmcd

Bestthingsinlifearefree wrote:

Hi Cath,

The portable bit is nice but irrelevant if you have to pay the mortgage of because e.g you are getting divorced or moving abroard or need to rent.....the portablity will not help you.

Think about it do you know people who have got divorced in a 10 year period or had to move to a different part of the country or wanted to sell and rent.


Sorry just to correct this misconception. A portability option is of particular value should a couple divorce. I should know I've done it and I really have no idea why someone would not think of this as a relevant option in these circumstances

Bestthingsinlifearefree

dwsjarcmcd wrote:

With the Woolwich the mortgage will be portable, so the answer is going to be 'nothing' unless of course you decide to not buy anywhere (not going to happen) or downsize and have a smaller , or no mortgage (in which you will pay some or all of the charges) Again OP will know where they are within this cycle

The portable issue does not cover many, many circusmtance e.g relocating abroard, divorce or you need to sell because you want to rent (e.g loss of job, want to move in with some one else or move to new area)