Stick with current mortgage lender or jump ship...help!!!

marky.fitz

Hi newbie here,

Hope someone can help or advise me on the best 'plan of action'???

Moving into a new property - value £280k

Deposit - £120k

Currently have (portable) fixed interest only mortgage with Direct Line of £78k fixed at 4.89% until June 2011 (paying approx. £321 per month) which has an early payment charge of £1400.

Spoken to Direct Line today regarding extra borrowing (82k) and they have put me onto RBS (their partners) who have given me the following options:
Fixed 2 year @ 3.99% (£799 arrangement fee)
Fixd 3 year @ 4.39% (£499 arrangement fee)
Fixed 5 year @ 5.49% (£799 arrangement fee)
Tracker @ 2.99% (tracks at 2.49% above Bank of England rate) (£799 arrangement fee)

All have additional valuation fee of £395

Would it be best to just pay off my Direct Line mortgage with the early payment charge and move everything over to a new mortgage lender or just go for the additional RBS mortgage and pay the additional arrangement and valuation fees?

Would it be a problem to get mortgage of £160k based on my deposit and salary (I earn £33k and my partner earns £16 but will soon be on maternity leave)?

Thanks in advance for any help or advise.

herbiesjp

At under 60% LTV you will have the pick of the market.

What you have to do is decide which of the above RBS options you like i.e. 2,3 5 year fixed or tracker.

Once you have decided that, you can then look to compare against other deals for the same timespan

You can probably get better than the RBS deals, but you will need to take into account exit fees, and set up fees to see if overall you will be better off

Personally I would be more inclined to look at 4/5 year fixed rates - to give a little certainty, and to cover yourself while the impact of the "new arrival" sets in as well (good luck andhope all goes well on that front )

Have you done any of your own research or spoken to a whole of market adviser?

marky.fitz

Thanks for the advise.

Also a 'hidden' admin fee and also have to pay interest (1 month) to exit Direct Line mortage.:mad:

Think I'm going to go down the route of 2 year fixed and see if they will waive the valuation...although I doubt it!

herbiesjp

Cant see them waiving it, as you are moving into a new property and you need to have one done.

Can they give you a KFI (illustration) combining both parts of the mortgage so that you know what the monthly mortgage payment will be?

marky.fitz

Apologies for my ignorance but what exactly is a KFI? :huh:

Spoke to RBS at the weekend (quite heated at one point!) :mad:

They are initally unwilling to offer me an interest only additional mortgage (of 82k) as they are not happy with vehicles of payment on the capital and are insistent on a capital and interest only mortgage which increases my payments by nearly £400 per month as opposed to interest only.

I personally couldn't see a problem as LTV is less then 60%.

Surely the eventual house sale should be sufficent?

Is there a maximum amount you can borrow on an interest only mortgage?

herbiesjp

The KFI is the illustration - the quote for teh deal you are looking at.

In this situation, as it is a porting case, they would have to include the details of the current scheme along with the new deal you are looking at.

Each lender sets their own criteria for repayment vehicles on interest only mortgages, and this has become a lot tighter in the current climate.

Cannon_Fodder

marky.fitz wrote: »

Surely the eventual house sale should be sufficent?

...and then where do you live at the end of your mortgage term...? And if there was another house price crash, as you reached the end of your term, leaving a shortfall...?

They will want to KNOW you can repay the mortgage at the end of the term, 25 years or whatever.

Interest Only was one of the causes of the credit crunch. If you wish your taxes to not be used to bail out banks again, they need to not offer it.

Switch to repayment basis, or deliberately overpay the IO basis, the sooner you start the less interest you pay over the life of the mortgage term.