remorgage help

DailySummerySheet

Hi people,

I am very confused about all the options available to me and my partner. Our current morgage ends on 31st January 2010.

We are paying £747.63 a month on a 5.18% 3 year fixed rate.

We are also seeing an advisor this Friday, but what is the best sort of morgage we should be looking for? what rate and how much we should be paying? I want to feel secure in the morgage but would also like to be paying a little less per month.

Thanks in anticipation for peoples help on this.

_Andy_

Not enough information to go on.
Wait and speak to your broker who will get a full idea of your needs and circumstances and then make a recommendation accordingly.

blueberrypie

DailySummerySheet wrote: »

Hi people,

I am very confused about all the options available to me and my partner. Our current morgage ends on 31st January 2010.

We are paying £747.63 a month on a 5.18% 3 year fixed rate.

First, your mortgage doesn't end in January, only your fixed rate does. If you do nothing, you'll just go onto whatever your mortgage agreement states, which will probably be your mortgage provider's SVR - that might well be under 5.18%, which would mean your payments would be reduced. One benefit of doing that rather than taking out a new mortgage is that there would be no fees involved, and no costs such as solicitors. So with a lower payment - quite possibly lower than the fixed rates you might be offered, and the money you'd save on fees etc, it's worth considering that as an option. If you were to change your mind in a few months and decide to go for a remortgage then, you wouldn't be tied in.

The point is that there is no rush to make a decision.

If you do decide to re-mortgage, the kind of mortgage you choose really depends on lots of factors. You say you want to feel secure, by which I think you mean you'd rather know exactly what your payments will be - in that case, a fixed-rate might be best, although it's worth thinking about what the rate would be when *that* fixed rate period ends. What's available to you will also depend on how much your property is worth and how much equity you have, and how your credit rating looks.

When you say you're seeing an advisor, do you mean a whole-of-market broker, or do you mean someone who works at your bank? If it's someone who works in a bank, he/she will only be able to provide information about the mortgages offered by that bank. I'd definitely suggest that you talk to a broker who can offer information a wider range of mortgages. I'd also suggest that you make it clear on Friday that you're not making any decisions there and then - that you will take all the info home and talk about it and possibly come back with more questions before making a decision - and ensure that the advisor does not go ahead and take any further steps on the assumption that you will be applying for a mortgage (such as running a credit-check).

DailySummerySheet

thanks blueberry that is exactly what I was after. I just want to arm myself with some facts and figures before meeting the advisor.

when the fixed rate ends it states we will go onto a base morgage rate (6.74%) so it looks like we will need to move morgages. We owe £132.000 and the house is worth aprox £245,000

is there any more info that would be needed to offer advice. Our credit rating is good

thanks again in advance

opinions4u

DailySummerySheet wrote: »

when the fixed rate ends it states we will go onto a base morgage rate (6.74%)

Was that the rate at the time you took the mortgage out or is that the rate now? It sounds like a historic SVR to me.

Who is your lender?

so it looks like we will need to move morgages. We owe £132.000 and the house is worth aprox £245,000

Not necessarily. What will your existing lender offer you?

DailySummerySheet

What is says on the letter

Morgage produce: 5.18% 3 year fixed rate
Product period 1: This interest rate expires on 31 jan 2010
Rate after product period 1: Base morgage rate (now 6.74%)
Projecte future payment 1: £886.30

this is with natiowide, which is why i didnt consider them a option

what do you mean by historical SVR?

_Andy_

The SVR when you took the mortgage out was higher than it is now.
You need to assess what NW may offer you (see their website).

if you want an idea of rates on the market have a look on Moneyfacts or the FSA tables.

opinions4u

DailySummerySheet wrote: »

What is says on the letter

Morgage produce: 5.18% 3 year fixed rate
Product period 1: This interest rate expires on 31 jan 2010
Rate after product period 1: Base morgage rate (now 6.74%)
Projecte future payment 1: £886.30

this is with natiowide, which is why i didnt consider them a option

what do you mean by historical SVR?

Thanks for providing that information.

6.74% is the SVR (standard variable rate) at the time you received your mortgage offer. I think Nationwide call it BMR (base mortgage rate). Same thing though.

Their current SVR/BMR for mortgages taken out before this year is 2.5%, tracking at 2% above the BofE base rate.

This is one of the best variable rates on the market. You should certainly consider the option of doing absolutely nothing when the time comes!

blueberrypie

DailySummerySheet wrote: »

what do you mean by historical SVR?

The SVR is the Standard Variable Rate - note that word "variable". What that means is that it changes - it's not a static figure. It varies by lender, but more importantly for you right now, it varies over time - and it has dropped considerably since you took out your mortgage.

It's historical because it's...well, it's history. The current SVR is much lower - and that means your payments will be quite a bit lower when you go onto it. You haven't given the details of how much you borrowed originally or how long you took your mortgage out for, but from what you have said, I'd estimate that your payments on a 2.5% SVR will be about £530. I doubt you'd find a mortgage giving you a fixed rate of less than 2.5%

I think, in your situation, I'd stick with that SVR. I'd take what I'd budgeted for fees etc (if anything) and use it to over-pay the mortgage - to reduce what I owed. And since my monthly payment had dropped by more than £200, I'd put as much as I possibly could of that to over-payments too. I'd be trying to get my mortgage balance down as much as I could now, while rates are low, so that when they go up again, I owed less and I'd still be paying less - and so I could get my mortgage paid off sooner than planned, and save myself quite a bit of money.

Talk to your advisor (and an independent one too), and then think about what they've said, and then come back here and ask more questions - don't decide until you are absolutely certain that you understand how it all works and that your decision is the right one. With a follow-on rate of 2.5%, you've absolutely no reason to rush it :-)