Mortgage Renewal Advice Please...

daleyland19

Hi,

I bought my first house in December 2007 on a 2 yr fixed rate with Northern Rock. Obviously going through the purchase process I became i little more 'mortgage savvy' but I am by no means competent. I am a little concerned about when we have to renew in December this year.

1. When should I start looking/applying?
2. I bought my house just as the credit crunch was starting and the mortgage payments are on the limit of what we can afford already. Is it very likely that I will be paying much more when I have to renew?
3. Will I even get a new mortgage?
4. Obviously alot can happen between now and then but am I best getting another fixed rate mortgage or a tracker? I think my current rate is around 7.5%.

Any help you could offer would be gratefully appreciated.

Cheers,

Dean

_Andy_

How much is owing on your mortgage and conservatively how much is the home worth?

daleyland19

When we come to renew i would estimate we have around £112,000 left to pay. If it is true that house prices have fallen by somewhere in the region of 20% then it will be worth about £98,000.

beecher

You'll be unable to remortgage then I'm afraid. You'd have to have at least 90% LTV - ie your house would have to be worth £125,000 in order to remortgage for £112,000. If it is worth £98,000 you'd have to come up with about £23,000 in order to remortgage.

You'll be on the NR SVR which is 4.79% at the moment. Who knows where it'll be by December

littlened

If I'm right, you would have to stay with your existing mortgage company, as someone else taking on your mortgage would mean your property wouldn't be worth enough to secure against the outstanding mortgage.

You'll need around 10% equity in the property to be able to change your mortgage to another company

*Edit* someone beat me to it

daleyland19

beecher wrote: »

You'll be unable to remortgage then I'm afraid. You'd have to have at least 90% LTV - ie your house would have to be worth £125,000 in order to remortgage for £112,000. If it is worth £98,000 you'd have to come up with about £23,000 in order to remortgage.

You'll be on the NR SVR which is 4.79% at the moment. Who knows where it'll be by December

This may sound incredibly dumb but what happens then if i cannot remortgage? Do we just pack up and get out or what? And are we then left with debts?

littlened

You simply stay with your existing mortgage company. You may have had a fixed rate for 2 years, once that's finished, they don't kick you out, you just get a different interest rate that's all.

Your mortgage with NR is probably over 25 year, but at a fixed interest rate for 2 year. Normally at the end of the fixed period people change mortgage companies to get a better deal, but at the minute a lot of people are being forced to stay where they are.

daleyland19

rriiiiiight, so is it likely if my current rate is 7.5% that it would go up in December?

littlened

daleyland19 wrote: »

rriiiiiight, so is it likely if my current rate is 7.5% that it would go up in December?

Looking at rates at the minute, the interest rate will reduce, as will your payments....but no-one knows what interest rates will be in december.

If your payment do drop, ask the mortgage company if you can continue to pay the same amount you do now...honestly, paying a little extra on your mortgage can have your mortgage paid off early and you could save a fair amount in interest.

We pay an extra 100 quid a month on our house, and I'm sure I worked it out that we will pay around £20,000 less in interest.

Our original mortgage was £310 a month for 25 year, so total payable would be £93000.
We pay £420 a month over 14 year now, so total payable now is only £70,560.

So... 93000 - 70560 = £22440 (this is how much interest we've saved)

daleyland19

Ok cheers, at the minute we are paying £780 a month so if it does reduce, depending on by how much it is definitely worth bearing in mind your advice. Cheers all!!!

littlened

daleyland19 wrote: »

Ok cheers, at the minute we are paying £780 a month so if it does reduce, depending on by how much it is definitely worth bearing in mind your advice. Cheers all!!!

I just punched some numbers into the bbc mortgage calculator
http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

I said the mortgage required was £112000, and the repayment period was 25 year, and interest rate at 4.79% (mentioned by another poster above).

It said your payments would be around £680 per month.

Lets say your mortgage payments do reduce to £680 in december, and you have 23 year left to pay, you will pay a total of £187680.

If you continues to pay what you pay now £780 per month, then your mortgage period would drop to around 17 year, so if you pay £780 a month for 18 year you will be a total of around £165000, saving you around £20k in interest.

My calculations may be way off the mark mind, I'm no expert. But it certainly shows the amount of money people throw away paying interest.