Help with transfering my mortgage please?

Threaps

My Wife and I took out a mortgage 3 years ago on a fixed rate of 5.5% interest only. We need to bring our costs down and would like to try and transfer the mortgage to a better rate. I am told by a mortgage advice company that I can only do that if we have a minimum of 20% equity in our property. We do not. We have a mortage for £475k and the house has just been valued at £500k. Can anyone see a way through this for us?

Also, we have a redemption penalty of 3% on selling our house. Can we get round this?

Thank you very much.

BULLNOTBEAR

Unfortunately not. Your Loan to Value is 95% and you will not get a lender offer you a mortgage and certainly not one cheaper than your current deal.

Have you tried to ask for a temporary move to interest only if you are on repayment basis now. You usually have to pay a fee (maybe £100) to change but they may not accept your request with that amount of LTV.

I don't really like people switching to interest only but if it is a temporary measure then it may be worth considering.

BULLNOTBEAR

when does the fix rate end as the standard variable rate may be lower when you come off the fixed rate. Who is the mortgage company?

Threaps

Hi Val,

Thanks very much for your kind reply. Fixed rate ends in 2 years time. IF is the org.

BULLNOTBEAR

I was hoping you would say in a couple of months as the Standard Variable Rate may be lower than the current Fixed Rate. I'm not sure what the IF rates change to after your initial 5 year deal but it will state it inthe original mortgage documents/Key Facts illustration.

IF no longer offer mortgages but you could ask if they are willing to change to Interest Only?

Sorry I can't help any further

_Andy_

No way around the ERCs.
If you're struggling and it's already interest only is staying in that house really viable?

Conrad

I'm afraid threaps your only options are to either tough it out as is or request interest only (cite the FSA's TCF initiative - it stands for trating customers fairly and for example is designed to provide a fair framework for customers experiencing payment difficulty - in other words the lender should offer all the assistance at it's disposal).

Apart from that, just sell and put it down to experience, but of course they may be many reasons this is not an option (schools etc)

A remo is impossible without much equity and even if you stump up some equity from somewhere, the lender will want a lot of documentation for such a large loan, what with the credit crunch

Best of luck

Threaps

Thanks to all of you for your kind replies. House is on the market but the redemption will kick in and make it not worth the bother. So tricky one. Thanks again.

JimmyTheWig

Do you realise that the redenption penalty would also be charged if you remortgage?

In which case you could view that 3% as 1.5% a year for the two years left on the deal.
Which means you'd need a 4.0% deal just to be in the same boat.
You've got no chance of beating 4.0% with the figures you've given.

Are you going through a rough patch financially, or realistically is the house beyond your budget?
If it's going to be a long term problem then either sell asap or struggle through and sell when the redenption penalty timeframe is over.
If it's a temporary problem then by far the best thing you could do financially is find any way you can to keep on top of your bills. Consider other ways to bring in money - taking in a lodger, extra work, downsize your car, etc. And ways to spend less (this site is great for that).
If you can struggle through then you'll come out of the rough patch much better off than if you sell now.