Re-mortgage dilemna

catmagpie

I recently received an offer from my lender (JPMorgan) offering me a discount of over 10K of the balance of my account if I was to redeem (sale or re-mortgage) in the next 3 months. I thought the letter was a joke when I got it but it is a very real (and attractive offer). The balance outstanding is 140K on a flat valued at 160K. I am currently on the SVR of 2.65%. My salary is in excess of 55K.

My credit file shows a good score but I have a couple of blemishes - one including a default dated Dec 07 (settled) and missed payments on a settled credit card closed in July 07. Unfortunately I have been declined my two mainstreet lenders failing their scores. I have 1 outstanding loan with Zopa which I could pay back and a balance on a credit card of about 3K (which I could again settle via savings). My IFA says that the default and missed payments are the sticking points, not the CC or loan.

Any ideas of the routes that maybe available to me? JPMorgan have indicated they are willing to raise their offer subject to me getting a decision in principle.

Thanks for your thoughts and ideas.

phlash

OK - quick back of the fag packet stuff....

2.65% pa on a £140k debt is £3,710 interest pa.

Let's say you get the £10k, so the new mortgage you need is £130k, which represents just over 80% LTV, in other words under a 20% deposit. With this kind of deposit you may well secure an interest rate at around 4.5% for say 2/3 years (Could well be worse). The fees in arranging this mortgage may well be circa £1,000. So total required to borrow is £131k.

4.5% pa on a £131k debt is £5,895 interest pa.

In other words it is £2,185 more pa, or £182 per month.

2 Points...

1) Can you afford an extra c. £200 per month costs.
2) The £9k benefit you would get would be eroded after just 4 years of extra interest.

Although the headline £10,000 might sound like alot, you are giving up a low interest rate. What would you feel more.....the detrimental increase in the monthly mortgage costs or the beneficial decrease in the capital amount borrowed?

I suggest you stay with the current deal.

PS. Saves you a lot of time in phaffing trying to arrange a new mortgage, especially with credit rating etc.

catmagpie

Thanks phlash.

dimbo61

You could ask them for a £20K reduction off the mortgage balance?

catmagpie

They may be willing to increase the discount but will only do so after seeing a decision in principle...I guess they want to make sure I can get a new mortgage.