Big House, bigger mistake

struggling-breadwinner

Three years ago we (i) was blinded by beautiful showhome and bought a big house with commensurate mortgage fxied 2 yrs at 3.99% had to re mortgage last year and, in my view, were not given great advice and fixed again for three years at 5.87% (barf ):eek:

We have (as they say on debtfreewannabe board) had our lightbulb moment and realised that we can't sustain thisstandard of living any longer. We have put the houseonthe market and are seeking a downsize.

Qu. Do I port over the fixed rate (part thereof) for the balance of the fix (2yrs) and pay a reduced penalty on the % I am clearing or do I use some equity to pay the penalty for coming off the product entirely and change to say a lifetime tracker? (penalty on whole o/s is £6,600)

We are lucky -ish in so far as previous sensible hosue mvoes have left us with a ortgage equating to 57% of current house value (£320,000 - although this is meaningles if it doesn't sell) I am minded to bite the bullet, use some equity tochange product, clear o/d and credit card and just get on with new much smaller mortgage (possibly judging by the house I like around £150k against £240k currently) and never EVER move again!!!!! But is this a waste of equity. would it be better to put all equity into the house? If i do this cause o the interest I would not be able to make in roads on my debts until 2011 when the fix runs out - assuming teh rate are still favourable then......

Whjy is life so complicated? And why am I, at 35 soooo niaive. Oh and if my dad is reading this SORRY !! ! ! ! I didn't want you to know how bad it was

poppysarah

It's not just you. A lot of people have been suckered into thinking that high house prices and "living the new build dream at any cost" is a good thing. It's not.

Take lots of advice before making a move.

struggling-breadwinner

feel like a goon. I have a Masters!!! clearly no common sense though!!!!!!

poppysarah

LOL do you feel like you just woke up and somehow it's got to 2009 and you've no idea how you got here?

struggling-breadwinner

yes exactly that! Every morning, and how when I was 18 and looked at everyone I knew who was 35 they were completely clued up and financially sorted. I now know that either (a) they were and I'm just useless or (b) they weren't and kids now look at me with the same misguided awe....
answers on a postcard!

lincroft1710

At least you woke up before the letters threatening repossession started arriving, although I don't think you're in anywhere near that position.

As poppysarah says take lots of advice.

LoopyPrune

33 here m8 and I aint made a good money decision yet. But get some independant financial advice, it may cost short term but the benefits long term should cause you less heartache.

silvercar

See a whole of market mortgage broker and get some advice on the best mortgage for your circumstances.

They can also calculate whether it is better to leave your current deal. If you have a 6,600 penalty on a 240k mortgage that is a penalty of 2.75%. If you reduce from 240k to 150k you will have a penalty on the 90k of 2,475 anyway.
For the remainder, roughly speaking if you went for a 2 year deal and expected to remortgage at the end of it, that 2.75% penalty adds just under 1.4% to the underlying rate. eg paying the penalty and moving to a deal at 4% is really nearer 5.4% once you've taken the penalty into account. For that reason it probably would be better staying with your current deal. I'm not sure that now is the right time to go for life time trackers; interest rates have only one way to go from here and that is up. The base rate tracker lifetime deals that everyone took a few years ago were at base rate +0.5-1%, nowadays you are looking at base +2-3%, so they are not that great.

Personally I would stick to the fix for another two years and then move when that exit penalty has disapppeared.

struggling-breadwinner

silvercar - OMG that made so much sense! Thank you ! I'm no good with figures...or money.....or chosing the right mortgage........or knitting.......I can mix a mean woowoo tho.......!!!
thanks again

struggling-breadwinner

oh the opnly thing I woul add, which may change everyones views a bit is that I am thinking of packing in a £75k pa job for a £30k one cause I HATE my job. in light of this perhaps changing would be good for (a) the immediate relief of lower payments (newjob has good regular and secure payrises as public sector) and (b) no 3 months payslips in 2011 when remortgage off fixed deal required. DON'T worry tho, have learnt from my mistakes and have calced out the value of mortgage I can REALLY afford ont he reduced salery if I go for it

franklee

struggling-breadwinner is your current mortgage 240K or the house you'd like to downsize too Can't see where the 57% fits in.