Help: end of discount and gonna get redundant soon

Wsb5tails

I've spent hours reading the threads of remorgages (supposed to be working!!) and instead of getting clearer I am getting more undecided. Can anyone remove some fog for me.
My Endowment Morg (£108k) with Abbey has a discount which ends 31st Jan 05 so I am looking to get a new deal.
I am gonna be made redundant and get a nice pay off of £40k at the end of March. I don't have a new job lined up and dont know how long it might take before I get another income but I am working on that. My Husband is working but we can't live on his income alone. We are both standard rate tax payers.
I have just been offered an Offset Tracker from Abbey at 5.5% which sounds OK as it will be a quick straight forward switch (small £199 fee but other legal, valuation hurdles). They also offered a 3 or 5 year discount on variable rates but they dont seem very competitive.

I could use my redundancy to pay off capital but that limits my access to funds if I need cash to live on. I have been tarting for a while and so have £15k on 0% Cards which is sitting in Premium Bonds in the hope I win big untill I have to pay back on the cards in 9 months.
Also have £9k between husband and self in ISA's and another £9k in Tessa/Isas.
Future is further complicated by the fact that Hubby wants to give up employment and go it alone, though he has been on about this for 5 years and lacks the courage.

oh and before you ask, I have volunteered for redundnacy have don't have payment protection.

Thanks in anticipation.

hairy_cornflake_2

There are many deals out there that are more competative than those offered by Abbey.

The main issue is employment and this must be your main priority before considering switching lender. A lot of lenders wont consider applications from customers either on notice or in probation periods

In the short term can you switch to an abbey deal with out any tie ins - paying 5.5% will be better than the standard variable rate of 6.75% - but try not to incur fees if possible

once you have secured further employment - then look at changing your deal to an even better one. You can then consider what to do the best with your redundancy monies

herbiesjp

You have not put any figures on the board relating to income.

Is your husbands income sufficient to justify the mortgage using only his income?

Whilst you say it is not enough to live on, it will have to be for the interim potentially, until you find another job. It may be sufficient to get a lower rate with a different lender, but difficult to say without the figures.

Just a thought.

MarkyMarkD

Although I almost always advise against offsets, yours could be the circumstance in which one makes sense. If the redundancy settlement is a material amount, offsetting is the best thing to do with it.

And 5.5% is not such a bad rate for an offset product, although you could pay nearer to 4.5-4.8% on a short-term discounted product.

Given that it will be hard to remortgage whilst you are on notice, I would stick with Abbey and take a product switch. As advised above, make sure that anything you take is easy to get out of without penalty - I don't know if this applies to your 5.5% offset deal, or not.

And then shop around for a proper remortgage when you get a new job, assuming that the savings from remortgaging at that time justify the effort and costs involved.

Wsb5tails

Thanks to all for replys which are very helpfull. The offset that Abbey is offering is without penalties so I should be able to change again in 4-5 months tinme for whatever is the best rate, assuming I have found another job by then. Hubby could afford Morg alone but as I have been taking home slightly more than him the drop in income will be a huge lifestyle change.
MarkyMarkD?
So in your opinion I should change again when my future is secure rather than sticking with the Offset. I have tried to do DiggingOut's calc from the Offset thread without success.
I was wondering if it would be worth taking £18k out of ISA's and TessaIsas earning 5.10% gross to use against offset Morg at 5.5% which tracks the Bank base rate for life of loan. This sounds to me like a good idea given the interest rates and tax savings over the 18 years that my Morg has left to run.
What do you think?

hairy_cornflake_2

I am sorry for butting in on a request for Marky but in your post your mentioned you had an endowment mortgage (interest only) - are you thinking of switching to a repayment mortgage? :-/

Wsb5tails

I wasn't thinking of changing to a repayment right now for a few reasons.
Our income is about to drop by 50% when I leave work and the extra payments on a repayment Morg will be too big a drain.
I am loath to get into any deals which may mean penalties if I want to change deals again in a few months, e.g. to get a discounted deal.
If I can get another job quickly, then I can do as suggested earlier and look at better ways to finance Morg and earn interest or pay capital off Morg with whatever remains of my redundancy.
My urgency in sorting the Morg now - for the short term is that the rate is going to go up from 5.2% discounted deal to SVR of 6.75% wef 1.2.05.

I'll take any advice offered. Would you suggest hanging on till April when I have redundancy in hand and might have got other work by then? Do you think I am rushing in too quick while there are so many variable circumstances?

hairy_cornflake_2

I asked the question because you were talking about offsetting your savings, when you have an interest only mortgage.

Based on what you have already stated, I would consider taking the Abbey deal as it would keep your payments as low as possible without any costs or tie ins.

I agree with you - finding a job is the priority - once that part of the jigsaw is in place you can re-evaluate your whole situation

MarkyMarkD

Hairy - no problem in interrupting!

so - in response ...

I can understand doing offset despite being on interest only at the moment - given endowment shortfalls etc., that's a good way of addressing any risk of shortfall.

I would NOT chuck in the long-term tax benefits of your TESSAs/ISAs/PEPs, in exchange for a short-term saving on your mortgage.

Whilst I think offset is OK in the short term for you, I don't think that it is a good idea in the longer term, necessarily. Once you are able to remortgage at a competitive rate, I think offsetting may become a bad idea and hence you want to retain your tax-free income sources as tax-free.

What I mean is that it might be worth avoiding paying 5.5% on the Abbey product, but might NOT be worth avoiding paying 4.4% or so on a better short-term discounted product. That's certainly my approach.

At the moment, you need the redundancy money in case you need to live off it (I presume) so having it available via the offset is a good idea.

Hope that helps.

Wsb5tails

All good advice and I am much clearer, thank you. I know where to come when I am settled and going through the Morg market again.