Remortgaging opinions

rossifumi_2

Hi,

I'm looking at the possibility of remortgaging, due to having received a lump sum recently. My current mortgage details are:

Lender: Nationwide
Amount: £520,000
Rate: 5.34, 10 year fixed, interest only
Taken out in July 2007

I am looking to remortgage and borrow £370,000 this time. My current criteria for remortgaging are:

- Change to a repayment mortgage
- Be in a position to get a better rate in the next few years (i.e. cheaper monthly repayments)

I spoke to NW a few months ago & was quoted a redemption penalty figure of £15,540 to exit my current mortgage. So, it would appear that based on current rates, I'm looking at a 2 year deal (on the lowest rates) to recover the cost of the penalty.

I've had a look at some of the best current rates and compared them over 2 years to the cost of sticking with my Nationwide:

Nationwide (pay off £150,000 and change to a repayment mortgage)
4500 (fee for overpayment)
24 x 2326 (monthly payments)
= £55824 (over 2 years)

Woolwich Tracker:
15540 (redemption penalty)
16x1565 (@1.98%)
8x1800 (@2.99%)
= £54980 (over 2 years)

FirstDirect Tracker
15540 (redemption penalty)
24 x 1700 (@2.68%)
= £56340 (over 2 years)

HSBC discount
15540 (redemption penalty)
24 x 1658 (@2.49%)
= £55332 (over 2 years)

So, there doesn't look to be a lot in it over 2 years, but if I do change and then can get a mortgage cheaper than my current 5.34%, I should then start to save. But I guess the gamble is how long the interest rate is going to stay low.

Advice welcome, thanks.

Gorgeous_George

How long is the tie-in and does it taper off towards the end?

GG

Thrugelmir

Your long term fix may pay off in the longer term.

Interest rates may well start moving upwards this year.

What's the maximum you can pay off your mortgage every year, fee free?

rossifumi_2

Need to dig out the original paperwork that is buried somewhere! The tie-in is 10 years (from the start date of the mortgage), and not sure about any taper. The redemption penalty figure hasn't changed since last year's statement, so perhaps it doesn't taper off until towards the end.

I can overpay it £500 per month.

My main aim is to change to a repayment mortgage and ditch the current interest only, which I can do with my current mortgage for a smaller penalty fee.

It seems that either way, I'll have paid a similar amount off in 2 years, so the gamble is whether I'll be able to get a better rate than 5.34 in 2 years.

Thrugelmir

rossifumi wrote: »

Need to dig out the original paperwork that is buried somewhere! The tie-in is 10 years (from the start date of the mortgage), and not sure about any taper. The redemption penalty figure hasn't changed since last year's statement, so perhaps it doesn't taper off until towards the end.

I can overpay it £500 per month.

My main aim is to change to a repayment mortgage and ditch the current interest only, which I can do with my current mortgage for a smaller penalty fee.

It seems that either way, I'll have paid a similar amount off in 2 years, so the gamble is whether I'll be able to get a better rate than 5.34 in 2 years.

If its interest only, then the redemption penalty probably won't reduce.

At least overpaying by £500 per month will bring the owe outstanding down.

I would suggest that in 3 years the question youu should ask is could you still get 5.34% as an interest rate.

You could invest some of your money into Corporate bond ISA's that would give a gross return around 5.5% - 7%. At least not lose you money.

opinions4u

You could invest some of your money into Corporate bond ISA's that would give a gross return around 5.5% - 7%. At least not lose you money.

The captial value will fluctuate, so there is a potential to lose money as well as make money out of this.

dimbo61

You need to talk to Nationwide and ask if you can keep you 10 year fix and change from IO to repayment !
Hopefully no FEES at all
Overpay by the £500 a month first and fill ISA,s in both yourself and OH name
Look at regular savers with HSBC and Barclays and look round for the best instant access current account for your savings
DONT pay £15,540 EXIT FEE
Check out the change from IO to repayment and then reduce the term to say 10 years ( much bigger payment each month ) and overpay on top
GOOD LUCK

rossifumi_2

dimbo61 wrote: »

You need to talk to Nationwide and ask if you can keep you 10 year fix and change from IO to repayment !
Hopefully no FEES at all

Spoke to NW this morning and it seemed pretty positive. There are no fees for changing to repayment or reducing the term.

Monthly cost of a repayment on the same term goes up to £3308, compared to the current IO payment of £2316.

Reducing the term to 15 years (repayment) ups the payment to £4206 per month.

A 10 year term (repayment) will be £5604 per month,

It would look like changing to a repayment & reducing the term to 15 years seems obtainable at the moment. I could stick the cash I have away and feed it into my current account periodically to cover the increased payments.

Thanks for all advice.

dimbo61

Like I said the 10 year fix is not a bad deal !
If you reduced the term to 10 years and drip feed the lump sum each month into the mortgage account along with your normal payment you could afford to do this for 4 years and reduce your mortgage balance.
Then ask to increase the term back to what you can afford once the lump sum is used up

rossifumi_2

dimbo61 wrote: »

Like I said the 10 year fix is not a bad deal !
If you reduced the term to 10 years and drip feed the lump sum each month into the mortgage account along with your normal payment you could afford to do this for 4 years and reduce your mortgage balance.
Then ask to increase the term back to what you can afford once the lump sum is used up

Sounds like a plan, thanks. The necessary paperwork is on its way to me.

Thrugelmir

opinions4u wrote: »

The captial value will fluctuate, so there is a potential to lose money as well as make money out of this.

Providing the bond reaches maturity, ie no default, there is no capital loss.