Reducing mortgage possibly..

mr2nut

Hi guys.

I've currently got a mortgage for £120,000 the house was £124,000 when I bought it. I got a fixed rate for 6.79% for 5 years. The mortgage life was 40 years and i'm paying £730 per month..

I have had a word with some colleagues who are very good financially and they are quite amazed how much over the odds i'm paying. Over a year i'm paying over £8000 and only around £650 of that is actually paying off my mortgage. :mad:

I would say that my house had dropped in value to around £115-120,000 but haven't had to officially valued as of yet. It was around a year and 2 months ago when I took out the mortgage.

I hope this is enough info and if anybody could recommend a good low fixed rate for 5years+ so that I can bring my monthly payments down that would be great.

What do you guys think of my current situation? :huh:

Jonbvn

Your interest rate is quite high and your term is much longer than normal. This means the majority of your payments are interest.

If you wanted to change your mortgage you would have to remortgage. This would be difficult/impossible for several reasons as follow:

1. Your would have to pay an early repayment charge (ERC) on your current fixed rate mortgage (maybe 3-5% of the amount owed).
2. Your LTV would be well in excess of 100%. You would have to make a lump sum payment of around £10-15k to get your mortgage down to 90% LTV. If you don't nobody would lend to you.

mr2nut

Jonbvn wrote: »

Your interest rate is quite high and your term is much longer than normal. This means the majority of your payments are interest.

If you wanted to change your mortgage you would have to remortgage. This would be difficult/impossible for several reasons as follow:

1. Your would have to pay an early repayment charge (ERC) on your current fixed rate mortgage (maybe 3-5% of the amount owed).
2. Your LTV would be well in excess of 100%. You would have to make a lump sum payment of around £10-15k to get your mortgage down to 90% LTV. If you don't nobody would lend to you.

So unless my house is still worth what I payed for it, i've got no chance in moving until the end of my 5 year fixed term? It's an absolute disgrace that someone from Halifax could actually offer me this claiming it's the best deal around, when in actual fact they're blatently ripping me off. Surely there's a case for sueing for this?

Lister_2

mr2nut wrote: »

So unless my house is still worth what I payed for it, i've got no chance in moving until the end of my 5 year fixed term? It's an absolute disgrace that someone from Halifax could actually offer me this claiming it's the best deal around, when in actual fact they're blatently ripping me off. Surely there's a case for sueing for this?

I'm not sure I see how you could sue. On what basis? Five year fixes are still around 5% even now, and I'm afraid there are thousands of people trapped in their current property/mortgage due to the credit crunch.

Hugbubble

mr2nut wrote: »

So unless my house is still worth what I payed for it, i've got no chance in moving until the end of my 5 year fixed term? It's an absolute disgrace that someone from Halifax could actually offer me this claiming it's the best deal around, when in actual fact they're blatently ripping me off. Surely there's a case for sueing for this?

Even if your house is still worth what you paid for it (unlikely) you have less than 5% equity so it wouldn't be possible to move deals anyway. Plus, you would have to find the money for the ERC and any fees for the new mortgage.

I don't think you have a case for suing. This probably was the best deal around as you had so little a deposit.

Wookey

mr2nut wrote: »

Hi guys.

I've currently got a mortgage for £120,000 the house was £124,000 when I bought it. I got a fixed rate for 6.79% for 5 years. The mortgage life was 40 years and i'm paying £730 per month..

I have had a word with some colleagues who are very good financially and they are quite amazed how much over the odds i'm paying. Over a year i'm paying over £8000 and only around £650 of that is actually paying off my mortgage. :mad:

I would say that my house had dropped in value to around £115-120,000 but haven't had to officially valued as of yet. It was around a year and 2 months ago when I took out the mortgage.

I hope this is enough info and if anybody could recommend a good low fixed rate for 5years+ so that I can bring my monthly payments down that would be great.

What do you guys think of my current situation? :huh:

I like to look at what i would have in savings as a comparison when working out mortgage costs, after 40 years @ 6.79% at £730 per month you would have built up an eyewatering savings pot of 1.8m, at 3% its about 680k.
Unfortunately your only into the fixed term by 14 months, you would need to read the small print in your agreement for any penalties with get out clauses etc to see if it would be worthwhile ditching and switching, i would try to overpay though if possible atm to reduce the amount of interest you are paying.

blueberrypie

mr2nut wrote: »

So unless my house is still worth what I payed for it, i've got no chance in moving until the end of my 5 year fixed term?

Even then, if you are in negative equity, you would not be able to move without paying off enough of your mortgage to take you out of negative equity.

It's an absolute disgrace that someone from Halifax could actually offer me this claiming it's the best deal around, when in actual fact they're blatently ripping me off.

It might well have been the best deal around, or at least the best deal available for your circumstances, when you took out your mortgage.

Surely there's a case for sueing for this?

Not unless the Halifax failed to give you accurate information about your mortgage when you took it out. If you agreed to the terms, they're perfectly entitled to stick to them.

You took out a mortgage over a very lengthy term - it's inevitable that for the first few years, most of your payment will go to cover the interest - that's how mortgages (and all loans) work. And you borrowed almost 97% of what you paid for the property - that's a very high LTV, which means that a lot of deals wouldn't have been available to you. Now that you are in negative equity, you have even fewer options. Even if you can get out of your current mortgage contract without large penalties, the only lenders who will offer over 100% on a mortgage are those who are making their money in some other way - like high interest rates.

slevin

i would damage limitation until th 5 years is up.

I would reduce the term to 30 years, this would cost an additional ~£52 a month in payments but will save £70k in interest! If you can afford more then obviously the better.

put your figures in here and see what effect reducing the term has on the monthly payment.

http://www.drcalculator.com/mortgage/

use the "Summary" button to see monthly/interest etc.

good luck