Need some advice on how i remortgage....

kandmanny

Hi All,

My fixed rate mortgage is due to expire in August. It's only a small mortgage which will be approximately 30k. I do not intend to stick with the current providers as their SVR is uncompetitive at 4.5%. One product I am looking at is the firstdirect offset with no fees. This is because of the attrative rate, the flexibilty of the mortgage for offsetting, overpayments, payment hols etc.

I have a few queries which I cannot seem to work out, so need the help of you all

1. Shall I remortgage now or wait to august to reduce the early redemption fees ? This will incur a 1% of total balance early redemption (£300), £50 deed release and £100 for something else..in fees. I think the firstdirect deal is very good and would not want to miss out on it.

1. On my current mortgage I pay about £500 a month and I overpay £500(max amount), when I remortgage I am planning to increase the term of mortgage to 25 years to lower repayment costs to about £150, but still overpay (no max with firstdirect) £850 a month so I actually pay off the capital (ending the mortgage earlier ??)......is this a good approach. Or should I just reduce the term of the mortgage so that my payments are £1000 a month.

2. I also have 10k in ISA savings which are on a 3%....I don't want to use these saving to pay off the mortgage as I need so cash for these uncertain times...however should I use them to offset the mortgage ?

Thanks,....I hope this all make sense and hope i;ve provided enough info

opinions4u

kandmanny wrote: »

1. Shall I remortgage now or wait to august to reduce the early redemption fees ? This will incur a 1% of total balance early redemption (£300), £50 deed release and £100 for something else..in fees. I think the firstdirect deal is very good and would not want to miss out on it.

You could apply now, book the deal and delay completion until after the £300 penalty expires (unless there's a T&C that prevents this). Alternatively, apply now and complete asap if the interest saving between now and August would exceed £300.

2. On my current mortgage I pay about £500 a month and I overpay £500(max amount), when I remortgage I am planning to increase the term of mortgage to 25 years to lower repayment costs to about £150, but still overpay (no max with firstdirect) £850 a month so I actually pay off the capital (ending the mortgage earlier ??)......is this a good approach. Or should I just reduce the term of the mortgage so that my payments are £1000 a month.

If you are disciplined enough to stick to £1,000 a month then extend the term to maximise flexibility.

3. I also have 10k in ISA savings which are on a 3%....I don't want to use these saving to pay off the mortgage as I need so cash for these uncertain times...however should I use them to offset the mortgage ?

Close call. If the mortgage rate is greater than 3% then offsetting may be the better financial option. That said, there could be benefits to retaining the funds within an ISA wrapper for the longer term. I'd probably max out the ISA.

getmore4less

You missed the key bit of info for an early change , the current interest rate.

I expect FD will still be offereing mortgage in august with similar differentials to base. Check how long the accepted offers are open(3-6months), you should be able to start the process early and change when the penalties expire.

ISA is use or lose so bet to keep them with FD you would have to cash them in to offset, some lenders allow ISAs to be offset. With offsets you don't need extra cash funds elsewhere so you can look at your ISAs as longer term savings.

Keep the term as long as possible more flexable, consider borowing more as well(just offset), this can make moving/porting easier in the future.

FD fee free 65% LTV £30000 @ 2.89% £1kpm 100% offset 32months last payment £176
FD £499 fee 65% LTV £30499 @ 2.59% £1kpm 100% offset 32months last payment £584

Since you will be mortgage free(100% offset) in less than 3 years I would start filling the cash ISAs now and consider other longer term investsments for the £1kpm surpluss you will have

ISAs are tax free for ever much longer than the saving on the mortgage.

kandmanny

Thanks to you both..great advice and just what i am looking for.

I think I will get the mortgage move right away to secure the deal, and also because of the greater flexibility and mean i can pay off the capital quicker.

Cheers :beer: