New MFW :)

Tabbitha

Hi MSE,

I'm new to the idea of being Mortgage Free and have spent this last week researching my options. Our Financial situation is 140,000 mortgage 19 yrs left (Self Cert with UCB) and a 19,500 Loan (with Kensington Mortgages huge interest rate), our circumstances have changed that we no longer need the self cert product, so can apply for a regular mortgage now. Our fixed rate is finishing end of this Oct.

My question for all you lovely knowledgable people is, in this current climate what is the best MFW type of mortgage, from my limited research I'm thinking of an offset as DH get bi-annual bonuses, but am worried abt the future interest increases. Most fixed products I've looked into have a 10% overpayment ceiling and I'm looking to over pay by £1000 a month, initially not 10% I know, but will soon be close to the margin.

Sorry to waffle on, but any advice, links to threads on MSE would be appreciated

Thanks in advance

StuartGMC

Tabbitha
Welcome to MFW and best wishes on the marathon ahead. Set small goals along the way, have a balanced approach to mortgage and other aspects you need to budget for including pensions, savings etc. Ensure you also include some luxury/treats in your budgeting.

Regarding the situation you are in; I assume you have some emergency funds saved (3-6-9 months outgoings requirements)? You haven't mentioned the interest rates but I assume both the loan and mortgage are higher than savings rates? The usual recommendation is to clear the loan with highest interest rate first, but you need to confirm you won't be penalised and that you will save money (i.e. the payments aren't fixed over a fixed term).

You mention concern over rates and only you can decide on whether to fix or not in terms of paying more initially with expectation rates may rise later to a level which would be much higher. Work out your "tolerance" of increased rates firstly and gauge the limitations such as the OP you have already highlighted.

Turning to Offset mortgages, these work very well in cases where you have good cash flow in the current a/c which would otherwise not earn much interest, you have a reasonable per centage of the outstanding loan in savings. The good thing about offset is the tax efficiency as you don't earn interest on the monies offset (which is even better if you are in the higher tax band), usually no limitation on overpayments (OP) and no early redemption charge (ERC). Do look into products which allow you to offset against Cash ISAs as this allows you to build savings and gain the offset, and once mortgage-free you will have these funds remaining in their tax-free wrapper....

However, for offset to work, then you must be able to work with funds sitting there and appearing accessible without spending them.

See the thread http://www.moneysavingexpert.com/mortgages/fixed-discount-mortgage-guide for fix or not etc and the articles under the "mortgages" tab above

dimbo61

Have a look at first direct 3 year fixed offset and YBS 5 year fixed offset !
security and allow unlimited overpayments or offsetting

Tabbitha

Hi, sorry I haven't replied earlier Thx for the replies. I've been reading the other posts in MFW, still have got loads to read through , very inspiring Well done everyone

My progress so far :-

I phoned Kensington Mortgages to ask abt Overpayments for the loan and I can make unlimited OP's as long as they are above £1000 and with an admin fee of £75 each time, so hopefully by end of Oct I'll be paying £2000 of the loan as I've got 900 banked at present and as it half way though the month might a well wait till end and do 2000 with one £75 fee.

Checked with UCB they will only accept 500 or less in overpayments each month on their products, so my plan is to get the Kensington loan paid off ASAP then apply for an offset mortgage.

I need to find out the value of our house so I can be sure on LTV I did the Nationwide estimater and it said 194000 approx we brought it for 165000 in Sept 03 we live in Southwest, but was kinda hoping it's more :rolleyes:

I currently do a very simple Excel spreadsheet each month, but if anyone has an easy to use MFW one I'd be grateful

PS I love this forum it's given me the kick up the bum I needed

Queen-Bee_2

Hello Tabitha - something else to consider may be playing around with the term of the mortgage,providing of course that your provider allows you to do this without an admin charge.

Nationwide does, and so, on a temporary basis, I have shortened the term from about 17 to two years. This allows me to pay just short of £4k a month. Once I've paid off about £40k of the mortgage, I intend to lengthen it again - and consequently pay less.

My situation is a bit 'fluid' at the moment, so I don't have an exact MF date. But if all goes well, and I'm able to pay off in line with my 'best case' scenario, I'll pay around £52k less in interest over the term of the mortgage.

Best of luck, and look forward to reading your diary!
QB

Tabbitha

Hi again,

Good news UCB sent us a letter as were coming to the end of our fixed product, we will go onto their SVR at 4.99% ! High I know !

On the upside I am able to make unlimited Over Payments whilst on SVR with no fee and as much or little as I want

I have a question, according to our income multiples we can borrow over 200,000. On the Nationwide House price estimater it states our house is worth 195,000 and the current mortgage balance owing is 142,000, so am I correct in thinking that regardless of our finiancial situation, we are only able to re-mortgage up to 70% LTV, in this scenerio equaling 136,500.
So we will need to reduce capital to 136,500 (and clear the loan stated above) before I can apply for an offset ?

Queen-Bee, 4K a month is an amazing amount, I bet that feels wonderful to pay off

JonnyBravo

It's a close call and will come down to the valuation on your house carried out by the lender.
They may value the house higher than the Nationwide calculator. They may value it lower though.
In short if the mortgage stipulates 70% LTV then yes you can only borrow 70% of the value of the house..... or more precisely the value the lender puts on the house.
Be careful you don't get stung into paying a load of fees for the mortgage and valuation only to find you then can't get any mortgage with whichever company you're looking at. Work on a conservative estimation of your house value.
Have a look at www.houseprices.co.uk to see what neighbours houses have actually sold for recently.

dimbo61

I would clear the loan first as on the higher % rate and just pay your normal mortgage payment when it drops onto 4.99%.
A fee of £75 really annoys me on top of the high interest rate so save hard and try to pay off in big lump sums of £3/4/5 thousand pounds.
Is this a secured loan ? If so you will need to repay before you can move to another lender !

Tabbitha

The last property sold in my immediate area was a flat in Dec 08 !

But, I agree I need to clear the loan first as it is secured against the property
It just feels frustating at the moment, because for once our income is pretty decent, apart from the loan and mortgage no debts at all no credit cards etc now.

So ideally it would have been good to put loan and mortgage together in a re-mortgage on a low interest rate, but thats not possible because of the LTV.

I might get our local estate agent out for a rough guide as this was originally a 3 bed semi and we brought it after it had been converted into a 5 bed by previous owners. So not standard of the other houses in the cul-de-sac.

In the mean time pay the loan off a fast as I can, I'm so determined, I hate this trapped feeling.

Tabbitha

Posted my first overpayment to Kensington today a cheque for £ 1120.00, so that will be a OP of £ 1045 (that's the admin fee of £75 deducted !! ) I'm finally doing it

The loan interest rate is 11.5% and is due to end Jan 2021, not sure how much in months or interest save it is, but I know it's a step in the right direction
Woo Hoo

evab_2

well done on the op, shame they charge you so much!