Remortgage quandary!

devon123

Hi everyone,

Like many people I am struggling to make my mind up with regards to a rapidly approaching remortgage!

I currently have a 2 year fixed (A&L - 5.79%) which runs out at the end of April. A&L SVR is 4.99% which is what I will go on to when my deal comes to an end.

I had my house valued last week at between 145-150k. At the end of April I will owe about 95k. I have been overpaying my £605 a month mortgage by £350 a month for the last year and can continue to do so.

I phoned A&L to see what they woud offer me and the rates weren't very good at all. I would have to pay another 20k off to get their better rates. When I bought my house it needed a lot of work which I have done but obviously their valuation still reflects what I first paid for the house.

I was thinking about going on to a tracker (cheapest I can see is +2.39% BofE base rate with no fees/tie in from First Direct) and continuing to pay the same amount I am at the moment.....and perhaps moving in 18months/2 years when I've paid off a reasonable amount of the capital and hopefully before rates shoot up. Reading latest BofE press releases they seem to think rates will stay low until 2011? WHat are your thoughts on this?

My take home pay is £1450 after tax a month and I rent a room for £350pcm to my lodger.

Any thoughts?
Thanks

moominyak

Hi devon123,

I've been eyeing up the same FD lifetime tracker as you (I'm tied into 5.89% until Oct 2011 but am considering borrowing the ERC charge as well), it looks great, my snags are that I'm probably just either side of the max 65% LTV (depending on the valuer's mood and which way the wind blows), and I don't quite earn enough to get the amount I need (I'm working on this bit though - see what my imminent review brings and take it from there!).

At £145k you would be just over the 65% too. And you'd need gross pay of about £23750 to get your 95k loan, I'm estimating you're a little under that (unless they will include your lodger income - I prefer to keep quiet about mine!). The FD website tells me the maximum they'd lend would be 3.5 x salary, but over the phone to them this morning I was told 4 (I need about 4.4, dammit!).

So I wonder if you may face the same snags as me in getting the FD deal.

It looks a good deal though if you can get it (not that I'm an expert, anything looks great compared to my current 'deal'!! ).

The other one I'm considering is with the Woolwich, it's a lifetime tracker @ +2.49% (so currently 2.99%), no product fee but there is an ERC payable until 30/04/2012. They will lend more (up to 5 times salary I think), and have a higher maximum LTV of 70%. But to me, that ERC is only 6 months past where I'm tied to at the moment, and I'd rather be tied up at a lower rate, paying more over the monthly minimum and on a much shorter term (all that, despite that I'd be owing more than I do at the moment!!).

Assuming, that is, that BoE base rate doesn't go above 3.4% before April 2012...!

I'd be interested to hear what you decide to do

devon123

Thanks for taking the time to reply mooninyak. Yeah, I may well fall just outside the 65% when the time comes, but I plan to throw as much money as I can at the mortgage over the coming months and may be even wait a few months on the A&L SVR so I get my LTV down.
I've just noticed today on the A&L website that they have a 2 year tracker with no fee (+2.49%). Perhaps that's a new one within the last week but they didn't mention that on the phone last week. No valuation fee unlike FD though. Who knows! Perhaps things will become clearer in the next few months. Inflation has gone up too so that makes me feel a bit nervous about it all.

A&L also have a 2 year tracker +1.99 above BofE BR but with a £995 fee. Now, I know I'm probably being a bit stupid here, but I can't work out how long I'd need to stick with this option to make it cheaper that the +2.49 with no fee deal. Hmmmm...?!

Good luck though! What would your ERC be?

moominyak

Just under £2.5k :eek:

But if I don't pay it as an ERC, I'm paying through the nose in interest... the reduced interest rate cuts my daily interest in half (even with the £2.5k added in) if I stick to paying what I do now.

I'm off to ring the Woolwich to see what they say....!

Dan_1976

Go careful with trackers, look at no or short ties. Inflation increasing and rates will rise. Maybe not to silly numbers but if your paying 2.5% then it jumps back to 5-6% ouch!

getmore4less

devon123 wrote: »

A&L also have a 2 year tracker +1.99 above BofE BR but with a £995 fee. Now, I know I'm probably being a bit stupid here, but I can't work out how long I'd need to stick with this option to make it cheaper that the +2.49 with no fee deal. Hmmmm...?!

Good luck though! What would your ERC be?

A rough guide is 0.5% on £95K which is £475py so over two years and because you are overpaying it will be a bit longer.

getmore4less

moominyak wrote: »

The other one I'm considering is with the Woolwich, it's a lifetime tracker @ +2.49% (so currently 2.99%), no product fee but there is an ERC payable until 30/04/2012. They will lend more (up to 5 times salary I think), and have a higher maximum LTV of 70%. But to me, that ERC is only 6 months past where I'm tied to at the moment, and I'd rather be tied up at a lower rate, paying more over the monthly minimum and on a much shorter term (all that, despite that I'd be owing more than I do at the moment!!).

Assuming, that is, that BoE base rate doesn't go above 3.4% before April 2012...!

I'd be interested to hear what you decide to do

if you continue to pay at the 5.89% rate then you build up overpayments to pay the ERC then buildup a buffer for rate rises.

Have you checked your numbers with a like for like example.

Sig says £118k and MFW post say 30y ish

Using whatsthecost

1. £118k @ 5.89% Oct2011 ( fixed) £699.15pm

2. £120.5k @ 2.99% Apr2012 (tracker) £444.79pm

lets say £700pm on both so by Oct 2011(20 payments) when you would be looking to change the fixed rate anyway.

Amount left after 20 payments with static interest rates.
1. £115,467.61
2. £110,337.41

Over £5k saved, break even month is 7 payments.

Now if rates stay low for 10 the 20 payments then go up.
1. £116,764.80
2. £115,460.80

[STRIKE]So by month 10 you are over £1k ahead which means you can now have the equivilent of a £800pm for the next 10months and still break even[/STRIKE]

So by month 10 you are over £1k ahead and £7 ahaead of the best the fix will do.

So to be no worse off than the fixed rate interest rates need to go to

@ £700pm 7.27% base rise of 4.28% so 4.78% [STRIKE](still £1k ahead)([/STRIKE]
[STRIKE]@ £800pm 8.31% base rise of 5.32% so 5.82% (uses up the overpayments)[/STRIKE]
OK tracker rates can change but the power of overpayments should not be overlooked.

Dan_1976 wrote: »

Go careful with trackers, look at no or short ties. Inflation increasing and rates will rise. Maybe not to silly numbers but if your paying 2.5% then it jumps back to 5-6% ouch!

As the above shows it is not that bad and they HAVE to go to [STRIKE]5%+[/STRIKE] close to 5% to be worse off.


Edit :to fix the error.

moominyak

Thanks for that both... I rang the WW last night and they are ringing me back tomorrow to go through an application... or so they think, but I think I'll abstain from applying for anything until I've had my review at work... I might be able to get the FD tracker then with no ERC.

I'd be looking to change the term, it's about 33 years currently and I'd like to bring it down to 26. WW gave a monthly payment of £556 so would be able to overpay.

Basically the Halifax will get my money either way, but at least if I moved (especially if I can get a no ties fee-free tracker) I could reduce the term and overpay, and I would feel like I might gain some ground over the coming year!

Sorry for hijacking your thread, devon123

hugger38

HI Devon123. I found myself in a similar position. I was on an interest only product with natwest. I worked out I could pay my redemption penalty (tied in for another 2 years) and still save within 18 months. Just work out the figures and done be put of with charges as you can still save money after the charges if moving onto the right product. Note though I stayed with Natwest and they were not keen to move me of the product they were making more money out of!

devon123

No worries moominyak!
Thanks for the messages all.
getmore4less - so I'd be better off with the no fee one over 2 years despite the higher interest rate?

Is FirstDirect still the best tracker with no tie ins or fees? (+2.39% over BofE base rate)

devon123

Bumping up!