remortgage - does this look ok?

msw_2

Hi,
We are about to re-mortgage for the first time, just wondered if any of you might cast your eye over this to check it looks ok. We are currently on a 3 year fixed rate of 4.99% with A&L. I thought this expired in Feb 10 (ie 3 years from when we bought) but I have just realised it expires at the end of Oct this year. I am due a baby any day now and trying to sort out our new mortgage before the baby (and sleepless nights/brain fog) arrives......

We bought for £200k with a £30k deposit almost 3 years ago. A&L say current LTV ratio is 89%, I suspect it is actually lower than this (due to local market etc). They say I could pay £95 for them to send out valuers but unless the LTV dropped below 75% their rates would remain the same. Doesn't seem worth pursuing!

Due to high LTV I don't seem to have a huge choice of providers.

A&L have offered:

4.99% fixed for 3 years -
5.49% fixed for 5 years -
Both have no fee attached.

I am thinking of going with the 3 year option. It is possible that we will move house within the next 3 year period. A&L say this mortgage is portable but do you think there is anything specific I should be looking at in relation to moving?

Thanks for any help.

luckyfool

Portability is desirable, but as many Northern Rock customers can tell you its not really worth the paper its written on. If circumstances mean your lenders criteria has changed or your ltv is outwith what they would lend to you as a new customer you could find yourself stuck. Of course if your ltv is 95-100% + when you want to move, unless you have a wad of spare cash somewhere to put down then you are unlikely to find another lender that would help on the new property either.

My own inclination disregarding other factors is to tend towards 5 yr deals at the moment, but if you feel that you will outgrow the property in the next 3 years then the 3 yr deal may make more sense.

RufusA

Those seem good rates - particularly considering your LTV. On the open market you'd be hard pushed to find any fixed over 3 years below 5.5% even if you could get a 85% LTV!

For NEW customers A&L would charge 5.74% for a five year fixed, nearly £1000 in arrangement fees, and only accept LTVs of below 85%!

So I'd bite their hand off - if fixed is the right way to go for you! Particularly as A&L allow some overpayments etc. In these interesting economic it doesn't do any harm to have a good history with one mortgage company as they may be more understanding if your circs. change for the worse.

A word of caution. Portability is not guaranteed, and is a subject to meeting the lenders requirements. So for example you are unlikely to be able to port the mortgage if house prices fall and you need a 95% LTV. If you will need to move in the next 3 years then a fixed mortgage with hefty penalties may not be right for you.

Personally I'd be inclined to go 5 years fixed, as the difference in cost isn't that much, it will take you nicely until little one starts school AND it's more likely in latter years that interest rates will rise where the fixed starts paying for itself.

However check the ERC, as you don't want huge penalties if you have to move or sell up for whatever reason and can't port the mortgage. 5% of 170k could be quite expensive!

All IMHO!

Rufus.

msw_2

Hi, Thanks for your quick replies! Really useful points there which I will think about. ERC is 3% - not completely sure that we would move but it is something we would be thinking about (in normal circumstances, with growing family etc). Decisions decisions - so hard to know what to do at the moment as we have no idea what is going to happen with interest rates/houseprices etc. But then again, I suppose we never do know....

dimbo61

As others have said think long term
5 years gives you security and you may want to only work part time or even have a break from work for a few
years.
5.49% fixed with no fees is a very good deal
If you can overpay