what happens when my deal comes to its end???

ads910

hi my partner and i have just brought our first house, our mortgage lender is natwest, 90ltv, 5 year fixed @ 5.99, the house cost 150000 with 10% deposit leaving us borrowing 135000.

the property we brought was a wreck and we have spent money renovating it, now is is complete the house is worth approx 170k possible more but at 170k i am confident that is would sell very easily,

we took the mortgage out in june so early days but i am interested in what happens at the end of the 5 year deal, how will natwest go about offering us a new deal, how it is calculated etc. im guessing they will value the property and the equity in the house will be the deposit???? not sure if this is correct?

i only ask as knowing this will give me a better idea of overpayments, and what is the best direction to head in.

thanks for any info.

opinions4u

ads910 wrote: »

hi my partner and i have just brought our first house, our mortgage lender is natwest, 90ltv, 5 year fixed @ 5.99, the house cost 150000 with 10% deposit leaving us borrowing 135000.

the property we brought was a wreck and we have spent money renovating it, now is is complete the house is worth approx 170k possible more but at 170k i am confident that is would sell very easily

You may be right. But most people overestimate the value of their houses and most people overestimate the amount an improvement to a property will add to sale value.

we took the mortgage out in june so early days but i am interested in what happens at the end of the 5 year deal, how will natwest go about offering us a new deal, how it is calculated etc.

1) They don't have to offer you a deal. Their SVR (or whatever go-to rate is identified in your mortgage offer) is all that they have to provide.

2) There is no point forward guessing the market by nearly 5 years. The last 2 years have seen remarkable turmoil that nobody could have predicted.

im guessing they will value the property and the equity in the house will be the deposit???? not sure if this is correct?

Moreorless.

They will probably use an indexed value based on your £150k value in June. If you believe this is incorrect, most lenders will usually allow you to pay for a revaluation that will then replace an indexed value.

If you can afford to overpay (and have a suitable savings contingency fund in place) then I'd overpay.

Hope that helps.

ads910

i have purposely underestimated the value, i have looked at the area for over 2 years before buying our house, currently there are 5 on rightmove, 2 @ 195k, 2 @ 190k and 1 @ 180k, whilst i think 195k is quite high at 180k there would be alot of interest hence why i say 170k as at this price it would be gone pretty rapid.

property cost 150k, invested 10k in renovations, complete renovation new boiler and heating system, brand new kitchen, brand new bathroom and wc, new double glazing, carpets floorings literally everything.

im not wanting to guess where the market will be in 5 years, as you rightly say thats just pointless mystic meg time, i am just interested in how they calculate the remortgage.

so for arguments sake if it was valued at 170k by the mortgage lender and i have an outstanding mortgage of approx 122k ( i think this is right after 5 years)then id have 48K equity, now what i want to know is, will the 48k be the deposit which would mean i could look into deals with roughly 40% ltv for better rates??

opinions4u

ads910 wrote: »

so for arguments sake if it was valued at 170k by the mortgage lender and i have an outstanding mortgage of approx 122k ( i think this is right after 5 years)then id have 48K equity, now what i want to know is, will the 48k be the deposit which would mean i could look into deals with roughly 40% ltv for better rates??

If your debt is £122k and they value the property at £170k that would by a LTV of just under 72%.

£122k divided by £170k = 71.8%.

A 40% LTV would require a mortgage debt of £68k (£170k x 40 / 100).

This site suggests that your £122k balance in 5 years time is pretty accurate.

dimbo61

The 2 main points at which rates get better is 75% LTV and 60% LTV
so if you can overpay by what you can afford over the next 4 1/2 years.
As your fixed rate is 5.99% you wont be able to get that from any current savings accounts so once you have an Emergency fund of 3/6 months of income then overpay.
The renovations will add value but many valuations are now now via checking what other properties nearby have sold for on the land registry

ads910

thanks for the link to that website very usefull would have saved me doing some maths earlier to get the 122k figure,

so going by the 72% ltv you worked out (thanks for that) if i only wanted to use 60% of it as the deposit would i get the 12% back?? if this makes sense.

im not taking any of these figures for anything other than to better understand what happens when it comes to remortgaging.

think i will do as you have said and get an emergency fund together then set up an overpayment, unfortunately at the time we took our mortgage out 5.99 was the best available to us with 90ltv, shame as at the time there was fixed rate deals for less than 4% with larger deposits.

the renovations we have done were done because thay had to be rather than to increase the value of the property, providing they help sell the property when it comes to it id be happy with that

cheers for the info

sammyjammy

You don't have 72% deposit you have a perceived 28% deposit but this is only realised if you actually sell up, you would not in this case be eligible for 60% LTV deals.

ads910

so if we dont move then how are we supposed to get a new mortgage deal, do they expect you to get another deposit together like when buying a new property.

opinions4u

ads910 wrote: »

so if we dont move then how are we supposed to get a new mortgage deal, do they expect you to get another deposit together like when buying a new property.

The equity in your property is your deposit. You don't have to hand over cash, it's held in the value of you house.

e.g. £170k value and £122k remortgage = £48k in equity which is your deposit of 28%.

dimbo61

If you can afford to over the next 4 1/2 years overpay as much as you can afford and you may have a 60LTV by the time you remortgage!

Ditto

Overpayments link http://forums.moneysavingexpert.com/showthread.html?t=155707