Now a MFW!

Gemmzie

After playing around with the mortgage overpayment calculator, we've decided to try and pay off the mortgage early. But am totally confused by what the heck is actually being paid out and why - DF sorted it and, well he isn't financially minded to put it nicely :rolleyes:

Mortgage with HSBC
12/03/06 statements say...
Interest-only = £33,916.38 (12yrs and 2 months) - £162.58 per month
Equity Release loan = 80,660.63 (15th April 2024) - £597.41 per month

Also, it says it's a flexible mortgage - so with the August 1st interest rise. I am correct in thinking the monthly payment amount will automatically be increased?
Is a flexible mortgage the best way? DF has defaults from last year, credit card payments - this would affect chances of getting a better mortgage I presume?


We also have an endowment with Norwich Union -
With-Profits benefit = £17,600
Total Regular bonus = £4,856.25
Maturity date - 3rd August 2017

Is this worth keeping, it costs £8.40 per month

elantan

hey great to see your continuing the m.s.e way of life ...you'll do this one quickly too all the best of luck

gallygirl

Gemmzie wrote:

Also, it says it's a flexible mortgage - so with the August 1st interest rise. I am correct in thinking the monthly payment amount will automatically be increased?
Is a flexible mortgage the best way? DF has defaults from last year, credit card payments - this would affect chances of getting a better mortgage I presume?


We also have an endowment with Norwich Union -
With-Profits benefit = £17,600
Total Regular bonus = £4,856.25
Maturity date - 3rd August 2017

Is this worth keeping, it costs £8.40 per month

Gemmzie, a flexible mortgage as far as I am aware refers to the fact that you can make overpayments as and when you want (and payment holidays but we will NOT be going there.....) Unless you have a fixed rate mortgage your payment will go up unless the lovely BS decides not to raise rates:rolleyes: .

Not an expert on endowments, but at £8.40 a month I'd keep it.

Is this the only way you have of repaying the capital????? £33,916.38 to repay in 12 yrs 2 months, I wouldn't want to be relying on the endowment to pay this, then another 80k in 18yrs - how are you planning on paying this back?

Gemmzie

Payment breaks, hmmm they promised that and when we needed it (Father's self employed and had a terrible month last November) they said, no we don't do those. Very confusing.

The endowment should pay off the interest only part. The other part, I have no idea - with the monthly payments is the theory but I can't see that working out correctly

Luke

Gemmzie wrote:

Also, it says it's a flexible mortgage - so with the August 1st interest rise. I am correct in thinking the monthly payment amount will automatically be increased?

Not always your bank will apply the increase to your mortgage more or less straight away. But some won't change your payments until there end of year.

About 4 years ago interest rates were really low and my payment was £410 over the next year rates went up a number of times this had no immediate effect on my payments. But at the end of the year I got my statement plus my new payment instructions saying I was to pay £464 an increase of £54. So as rates had gone up they were applying these to my account but I was still paying £410.

The reverse situation can occur when rates fall you pay too much without realising.

Best to have a DD fixed higher than your required payment then you are always coved from this sort of thing.

Joe_Bloggs

@Gemmzie
Lets try and see what interest rates you are paying at the moment.
£33196.38 paying 162.58 per month. Interest per year = 12 x 162.58 = 1950.96. dividing this by the loan amount gives 0.05877. Multiply by 100 to make it a percentage. The rate becomes 5.88%.

For the £80K (assuming it is repayment) the interest rate is 5.6% using trial and error with a mortgage calculator. Goal seek with a spreadsheet would have been quicker.
It might have been more informative to quote the rates in the first place. You will have to research the flexible features of your mortgage yourself. Often this feature also includes no tie ins so you can remortgage to a better rate when you can. There is often value in the flexible features but this can be at a cost of paying more interest.
J_B.

Gemmzie

Sorry, it's 6.25% at present

Joe_Bloggs

So much for my rubbish calculations. These rates are not very good. How long have you been on them. Are you in a discount period ? When will they change to standard variable rate ?

Unfortunately mistakes made with credit tend to blight a credit record for six years. Often these amounts can be for a few pounds . Some lenders are OK with single defaults that have been settled. The penalty for messing up your credit record is often a poor mortgage rate. Fee free independent mortgage brokers are probably best at sourcing a competetive deal from a poor credit situation.

The general principles of paying of the debt with the highest interest first still apply. There are often strange limits on overpayments. Some are £500 max and others are £500 minimum. Some want overpayments to be regular, others want them once a year. You have to do your own research.
J_B.

Gemmzie

Have had a letter from Norwich Union and the endowment for £50k is expected to pay out between £30k and £40k so that will cover the interest only part of the mortgage.

As far as I can tell, father is expecting the other part to be paid off by the monthly payments

Will contact the bank re:overpayments, thanks