Remortgage or wait? Loads of questions!

dougggie

My current morgage consists of a ported fixed rate of 3.95% on 77k and a tracker variable of 5.75% on a further 53k (I moved house last year and didn't want the extra borrowing to be tied down).

The fixed rate is up at the end of March, and I have a penalty of roughly 5% of the (£77k)amount repaid if I remortgage elsewhere before then.

I'm paying out £877 a month for the mortgage over 20 yrs. On top of that, I have a loan with around 23k outstanding at 6.73% for 79 months, and just under £12k on a 0% card (deal expires mid Feb).

So, total monthly repayments are hitting nearly £1600 at the moment and I'm not quite sure of the best way forward on this.


Should I
a) remortgage for the mortgage value only or try to borrow more to cover all debts at a lower monthly rate?

b) should I stick to repayments or go for interest only for a couple of years to clear off the other debts?

All the salary multiples I've seen cover me & husband for the mortgage borrowing, but none seem to go up far enough to include the loan and card. My current job pays a 10% bonus (not guaranteed unfortunately) so I would be able to make a lump sum capital repayment every year.

c) Any other advice? I'd thought of going for the offset mortgage with first direct as we already have a bank account with them, but opinion seems to be fairly low on offsets if you don't have savings.

Thanks
dougggie

cloud_dog

My current morgage consists of a ported fixed rate of 3.95% on 77k and a tracker variable of 5.75% on a further 53k (I moved house last year and didn't want the extra borrowing to be tied down).

The fixed rate is up at the end of March, and I have a penalty of roughly 5% of the (£77k)amount repaid if I remortgage elsewhere before then.

I'm paying out £877 a month for the mortgage over 20 yrs. On top of that, I have a loan with around 23k outstanding at 6.73% for 79 months, and just under £12k on a 0% card (deal expires mid Feb).

So, total monthly repayments are hitting nearly £1600 at the moment and I'm not quite sure of the best way forward on this.

There's alot to go thru on this and a few variables missing that may affect decisions, such as your age for example, but......... I'll make a start and I'm sure others will offer opinions / advice.

With the mortgage, why 20 years? If the repayments are a bind you could extend to 25 years when you re-mortgage (hense the age question). I know you would be repayming more over time but it would give you a quick fix - dropping your repayments by approx £100pm (you could always increase / overpay later if you wish to).

Your existing fix is a good rate and with the 5% penalty clause I would continue and remortgage when the deal expires. Using Nationwide Base Rate Tracker as a guide (4.75% currently) you will not save much (£27pm approx). If you were to go with a discounted mortgage you could, obviously, save a lot more.

Should I
a) remortgage for the mortgage value only or try to borrow more to cover all debts at a lower monthly rate?

Based on your multiples it looks like you are stuck with the max you can borrow. FYI some lenders will include bonus payments into the multiples. It is always worth asking when you remortgage the max you can borrow, and if you are comfortable, borrow as much as you can to pay off the loan amount.

b) should I stick to repayments or go for interest only for a couple of years to clear off the other debts?

I think, in the absence of any other finances to repay your debt, changing to internest only for a short period could be a good idea (just remember to ensure you make every effort to catch up / overpay once your loan is payed off)

All the salary multiples I've seen cover me & husband for the mortgage borrowing, but none seem to go up far enough to include the loan and card. My current job pays a 10% bonus (not guaranteed unfortunately) so I would be able to make a lump sum capital repayment every year.

c) Any other advice? I'd thought of going for the offset mortgage with first direct as we already have a bank account with them, but opinion seems to be fairly low on offsets if you don't have savings.

How comfortable are you juggling 0% CC. If you are comfortable / can afford the repayments you could start to address your loan via this method. Continue with your existing 0% card and transfer that to another one when the deal is nearly up. Apply for either an Egg or MNBA (or affiliate - Abbey, Virgin, etc) CC; these will allow you to do a SBT to your current account. you could then use this money to start to repay your loan. You need to ensure you continue with the balance juggling otherwise you will end up paying twice as much interest as the interest on your loan. If you are not comfortable doing this then leave the loan where it is but look to use the methods above to bring this balance down as quickly as possible.

cloud_dog

MarkyMarkD

All excellent advice from cloud_dog.

I would definitely stay where you are until March.

At that stage, you might not need to remortgage. If your lender is a good one, they'll let you switch products to anything they offer to new borrowers. If they'll do this, it'll work out cheaper than the legal costs and hassle of switching.

When you've worked out the income multiples, have you deducted amounts in respect of your loan commitments? Most lenders will do this.

If you are finding your current level of repayments a struggle, it is not overwhelmingly likely that a lender will lend you the money for a mortgage, let alone to consolidate your other debts.

dougggie

At that stage, you might not need to remortgage.  If your lender is a good one, they'll let you switch products to anything they offer to new borrowers.  If they'll do this, it'll work out cheaper than the legal costs and hassle of switching.

Lenders are Bristol & West - they've come up with decent rates in the past but have stitched me up enough times on penalties and tie ins without allowing for any overpayments etc.

When you've worked out the income multiples, have you deducted amounts in respect of your loan commitments?  Most lenders will do this.

Yes, we had a thorough vetting to get the extra borrowing last year which was when I realised getting married had more complications than expected (apart from the costs!) - they were fine with the salary multiples and the bonus but not with the loan element, and now of course we have the card debt....New year's resolution is sort out finances once and for all (and stop unnecessary spending) so it's a case of finding the best way without damaging the credit record.

If you are finding your current level of repayments a struggle, it is not overwhelmingly likely that a lender will lend you the money for a mortgage, let alone to consolidate your other debts.

We can *cope* with the repayments, but it doesn't leave a lot of excess, hence the temptation to put more on credit cards. However, most of the debt has been shouldered by me alone in the past and we're now looking to share a little more of the pain over a longer period if that's better

dougggie

Thanks cloud_dog - a few more comments below

With the mortgage, why 20 years?  If the repayments are a bind you could extend to 25 years when you re-mortgage (hense the age question).  

My age coming up to 38, it's my 3rd property and I'd got the repayment time down to 15 years on the last place - went against the grain to go back to 25 years but I'm now seeing past my stubborn streak to think sensibly

it would give you a quick fix - dropping your repayments by approx £100pm (you could always increase / overpay later if you wish to).

Agreed - although past fixed & capped rates have not permitted any overpayments or increased payments without penalty. The current tracker rate is flexible, however.

 

I think, in the absence of any other finances to repay your debt, changing to internest only for a short period could be a good idea (just remember to ensure you make every effort to catch up / overpay once your loan is payed off)

Do lenders still insist on a form of endowment policy to ensure capital is repaid, or is is acceptable these days to have interest only on a non-investment property? Again, if I stay with B&W, they'll charge a fee to switch from repayment to interest only, though it may only be £50....

How comfortable are you juggling 0% CC.  

*Very* comfortable with something for nothing ;D Mind you, having attempted this without the aid of this site in the past, I've fallen prey to missing my deadline dates and paying standard rates. Have had an egg card for a couple of years, and MBNA for longer, but only just getting round to cancelling old cards as that is probably hampering me getting another. Applied for a new card pre Xmas but have had no response...they have looked at my credit file though....but not sure if I'll be rejected as the application was for another MBNA card. Have only just realised how much of the market they control!

Thanks for the replies, you've given me more to think about, and prompted me not to rush into things for a couple of months

cloud_dog

Douggie

I've had a fixed rate mortgage before that allowed overpayments up to 10% overpayments pa (Skipton, but I know others do similar). Am currently with Nationwide BRT (4.75%) hense the example. Possibly the principle difference is that since my first mortgage I've only ever taken out mortgages that allow overpayments (if fixed / discounted) and do not have tie-ins beyond the term of the deal.

Again, since my first mortgage (C&G - bad expereince) I've only had interest only mortgages and hace made sure I invest money (to pay it off eventually) and made small overpayments. As I've only ever done itnerest only I've always kept the term at 25 yrs as it makes no difference. All the lenders I have used have been happy for me to just confirm that I am saving / investing (no endowments) in order to repay the loan - no actual evidence required.

If you can do the CC transferring then this would be very useful in getting your loan repayed quicker, especially if you can get a Virgin (MBNA) or similar as the min repayment is only £5pm.

The other reason to hold fire with your existing deal is that (although no one has a crystal ball - I'll go out on a limb here) it looks like interest rates may end the year equal to of lower that they are today (that's not to say there may not be another rate rise in the future). I tend to keep an eye on the no exetended tie-in 2yr fixed rate mortgage deals as a *possible guide*. A few months ago there were no offers below 5% now there are a number (although high arrangement fees).

cloud_dog