Remortgaging - Can you give the lender a lump sum to get good deal/reduce balance

gingerplum

I am coming to the end of my 5yr fixed mortgage deal. Basically we bought the house for £126K, took out the mortage for £120K. Now at the end of the 5yr term we have £108K left. My wife and I try to be as prudent as we can be and didn't overstretch making sure either of our wages could pay the mortgage if the worst happened.

So basically we have saved and have around 25-30K savings over the term. Saving rates are rubbish and looking at the guides on here I am probably better paying my mortage.

So my question, if I go to my lender and re-mortgage can I pay a lump sum off the mortgage at that point without getting charged. Is it actually possible to give them £20K to qualify for some of the better fixed-rate mortgage deals? You need 70% LTV so can I give them money to make it up to this value. Or maybe it may be easier to move to another lender (I know I may incur a charge for leaving). I am looking for another 5yr fixed as we like the security...

It all confuses me and none of the material on the internet really answers my question.... This is the first time we have remortgaged... :think:

angel81

HI gingerplum

Yes, you should be able to make a repayment as big as you want once you are released from the contract, and this may reduce the interest rate on any new deals by reducing your LTV. Just phone up your mortgage provider to check:
1. You are at the end of your contract (this is usually same length as the fixed term deal but not always)
2. What the new interest rate would be for a 5 year deal
3. Check what, if anything, the charge would be for leaving. If you are at the end of the contract this shouldn't be more than about £250

You should then speak to an independant mortgage broker to look at the market and calculate the best rate for you. They will tell you what fees there are to pay and be able to recommend the best deal.

A couple of things to note:
- it's not a good idea to tie all your savings into the mortgage, you should save some for emergencies
- you should look for a mortgage that allows you to make overpayments going forward (this will be possible with a 5 year fix). You can often make overpayments of up to 10% per year with no penalty, which will reduce your interest immediately (check details of this with your broker). Alternatively, you could reduce the mortgage term which would mean higher payments now but obviously you will pay it off quicker (just don't overstretch yourself)
- the LTV will be calculated on the current value rather than what you paid 5 years ago

HTH

gingerplum

Yes all those point are things I've thought about... Thanks for confirming/clarifying them...