Remortgage advice

Craig_A

Been in my home for getting for two years now and looking to remortgage. I had a two-year tracker with Abbey which ends on 18th August. This is my first place hence I've never remortgaged before.

To complicate matters I have several incomes which confused the lenders completely when I took out the original mortgage:

PAYE:

03/04 £27,231.85
04/05 £29,490.45
05/06 £26,623.69

This is made up of basic rate of approx 20k with the rest being overtime.

Partnership:

03/04 £22,724.57
04/05 £34,000.00
05/06 £44,575.00

The mortgage is in my name alone so there are no other incomes to include in the calculations.

Because of the partnership income it is very important to me that I can overpay the mortgage by a maximum of around 15-20k around this time of year. My plan is to pay the mortgage off as soon as I possibly can and then look at other investments at that time.

The property itself was purchased for 208k and, although in general the market hasn't moved at all since then, I expect it is worth 215-220k as a result of improvements I have made.

The original mortgage was for 130k but, through overpaying, there is currently in the region of 93k owing. As I have reached the 10% limit on overpayments for the year I have placed further funds in a high interest account until the time I obtain new mortgage.

So basically I am looking for a 80k mortgage over 15 years with the ability to make overpayments. I would prefer a fixed rate ideally but I am happy to look at others as the market dictates.

I would appreciate any advice.

Will there be an issue with the overtime and partnership elements of my income? I have all my payslips from PAYE employer and tax returns from partnership if needed?

How will the process of moving to a new lender pan out? How do I bring my savings account funds into play given I have reached my overpayment limit? Do I apply for a 93k mortgage and then pay the extra to the new lender?

Whilst the idea of a long-term discount or fixed rate mortgage appeals I do not want to be tied in. So I am thinking a two or three year deal. Thoughts?

Also - kinda related - do you think it is worth me continuing with life insurance given that I live alone and have no dependents? It is something that I have been pondering for a couple of weeks.

Thanks in advance for ANY help offered.

HelpWhereIcan

Craig_A wrote:

So basically I am looking for a 80k mortgage over 15 years with the ability to make overpayments. I would prefer a fixed rate ideally but I am happy to look at others as the market dictates..

There should be no issue in you getting this - I would say that you will be better off paying a potentially (slightly) higher rate to get a deal that is completely flexible rather than one that restricts you to a certain amount (eg 10% pa). Who and which deal will depend on a number of things including how long you want the rate to be fixed and any tie in that you are willing to accept.

Craig_A wrote:

Will there be an issue with the overtime and partnership elements of my income? I have all my payslips from PAYE employer and tax returns from partnership if needed?.

No - the amount of equity you have and the track record of your income mean you should have no problems. Many lenders will do the amount you need on your PAYE income alone.

Craig_A wrote:

How will the process of moving to a new lender pan out? How do I bring my savings account funds into play given I have reached my overpayment limit? Do I apply for a 93k mortgage and then pay the extra to the new lender?.

There are arguments for doing it this way (eg building up a 'reserve' to allow you to underpay/take payment holidays), but I would think that you could be better to remortgage for the £80,000 on a deal that does not restrict your overpayments to say 10%.

Craig_A wrote:

Whilst the idea of a long-term discount or fixed rate mortgage appeals I do not want to be tied in. So I am thinking a two or three year deal. Thoughts?.

No right or wrong answer - how comfortable are you wth being tied into a lender for 2-3 years. There are some fixed rates that have no tie ins at all, but the rates reflect that. What are you reasons for wanting a fixed rate. There are long term tracker deals around that are less than 5%, completely flexible with no tie ins at all - if you are happy for your payment to vary with interest rates and to take the risk that rates may rise quickly, then you may be better off with a long term variable rate to get a completely flexible deal.

Craig_A wrote:

Also - kinda related - do you think it is worth me continuing with life insurance given that I live alone and have no dependents? It is something that I have been pondering for a couple of weeks..

does it include Critical Illness? are you likely to have dependents in the future? A number of things come into play, I would say to get some advice from a professional.

All in all, I would advise you to get some advice from a whole of market broker who can discuss what you want in detail and assess your needs against what is available.

hope this helps

Craig_A

Thanks for your suggestions. I've spent a little time this evening looking at various comparison sites trying to get my head round what's available again. It's only been two years but it's amazing how out of touch you become in that time! Obviously will speak to a broker but I want to get a better idea of what I want first.

I hadn't considered going for a pukka flexible mortgage - was automatically looking for discount deals - but I guess circumstances have changed in the past two year with the upturn in profits from my partnership. And I really don't want the overpayments to be limited in case they improve further still and I can afford to put more into the pot.

I found a deal on offer from the Woolwich fixed at 0.19% above their base rate for the duration of the term. That would certainly be of interest as it's only a fraction above my current discounted tracker. Though I'd prefer it was tied to BOE base rate obviously...

One further point about the savings that I would like to put into the mortgage. How do I actually get that money into the pot? Currently the mortgage is 93k and I am thinking of the new mortgage being 80... what happens? Do I arrange a transfer of 13k - in addition to the 80k from the new lender - payable to the current lender?

Also, what timeframe should I be looking at? Should I be moving this on now or in a month or so time?

Good point about the critical illness cover. I will definately look at this in greater depth once I have got my head round the mortgage itself. Currently I have life and critical illness cover on a reducing basis which is supposed to pay out enough to cover the outstanding mortgage. It is likely a better option to investigate critical illness cover only but on a level rather than reducing cover... depending on cost, of course.

Thanks in advance

MortgageMamma

Hi Craig,

Mortgage deals change all the time, so if you are looking to remortgage in August there is no reason why you cannot apply for a mortgage now but specifiy that it must complete after the date in August so there are no ERC's. Fixed rates are currently rising rapidly and as a result the variable rates are seeming more attractive to the majority of people.

The woolwich product you mention is a good one, see my other posts on woolwich's admin though) but you could also consider a current account mortgage or an offset.

As HWIC says, see a broker, brokers often have deals that you cannot get directly, and by the time you have gone through the advice process you will be a bit more mortgage savvy, and will definately know what you want, both with the mortgage and the insurance elements.

HTH and GL

MM

silvercar

You could also look at an offset mortgage. All your savings/ extra income can then be used to bring down the mortgage with the flexibility to take the money back when you need it. If you pay tax on your patnership income in the January after the end of the tax year (as many do) it means the tax money can be utilised to reduce your mortgage until you have to pay it over.

Craig_A

silvercar wrote:

You could also look at an offset mortgage. All your savings/ extra income can then be used to bring down the mortgage with the flexibility to take the money back when you need it. If you pay tax on your patnership income in the January after the end of the tax year (as many do) it means the tax money can be utilised to reduce your mortgage until you have to pay it over.

Thanks for the input.

Silvercar, I like the idea of an offset mortgage, but the rates aren't as favourable. Also, it may sound silly, but I would prefer to physically pay the money over to the lender. That way I am not tempted to take off to Australia for three months next time it rains!

Very good point about the January payment on account but I pay The Revenue with funds from the business account and then 'settle up' at the end of the year.

joepubli

I am in a similar position and looking at Intelligent Finance' 1 year fixed offset at 4.44%. Seems pretty good value to me.You can get a £90k mortgage and then put the excess in the offset acount - if you need it, its there and when you don't its saving you interest. You can also leave your tax or partnership money there.

Woolwich 0.19 over base is also good. The fact that they may be very slow doesn't really bother you, you have months!

Joe

joepubli

I wouldn';t worry about Barclays base rate being different to BoE - it hasn't happened for a long long time and is very unlikely. In any case the deal is without penalty. There is no pracfical difference between the two

Craig_A

Me again!

Having spoken to a broker I have two options that I am liking. I have said that I will mull them over for the weekend and let them have my decision on Tuesday.

Option one is the 0.19% above Barclays base rate tracker for the term of the mortgage. There are no legal or valuation fees whatsoever.

The second option is a five year fixed from Northern Rock. This is 5.19% which seems reasonable given the likelyhood of a rate rise. However there are fees involved: £695 arrangement fee, £505 valuation fee and £303 legal fees but they do offer £1000 cashback when the mortgage end, 'to offset the costs.'

I am really preferring the idea of the Woolwich/Barclays offer to be honest. But I have to weigh up what the mortgage rate will do in the future. Any thoughts? What would you go with in my situation?

Thanks in advance

Ian_W

No idea what IRs will do in the future and neither does anyone else. Sorry if that's unhelpful but anyone who could fortell the future would be on a yacht in the Bahamas, not posting on MSE.

On a more helpful note, be very careful with NR products that offer cashback. I don't know whether the one you're considering has a tie-in to SVR after the fixed rate ends but some do. In other words your cashback has to be paid for by being stuck on an uncompetative rate - should be highlighted as an overhanging penalty - but often isn't.

Slayerx

I work for a conveyancing firm and the popular offers seem to be with Woolwich, Halifax and Britannia Building Society at the moment.