Advice requested on remortgage offer from HSBC

Pauleb80

My situation is that I bought a house for £125k on 100% mortgage in Jan 2007 with my partner at the time. House now worth slightly less (negative equity). Fixed rate ended and moved onto SVR (3.94%).

Not long after purchase split with partner. Due to fixed rate and house prices have had difficulty going our separate ways in terms of being jointly tied in with mortgage. Now looking to remortgage to finally go our separate ways. Major problem due to negative equity however HSBC have agreed to consider putting my fianc! on the mortgage in place of my ex.

House is currently rented and has been for majority of time since purchase however I am considering moving back in. Ex is happy to walk away. Fianc! is happy to move into house but understandably wants ex to no longer be involved and has said she’s happy to come onto the mortgage in her place.

HSBC have no said they’ll consider this proposal (without any guarantee that will allow it). Appreciate its unusual for them as ordinarily they wouldn’t entertain the idea due to the negative equity - this is the response I’ve had from them for quite some time but now seem to be more willing to listen to what I have to say. To consider it further they’ve said we must agree to leave the SVR. The offers on the table are:-

• 2yr fixed @ 5.99% with £599 fee
• 5yr fixed @ 6.79% with 599 fee
• Lifetime tracker @ 3.99% above base rate with £499 fee

Toying between the 2yr fixed or the tracker. Payments would be less (currently) on tracker but security on fixed is appealing. This would however be £200 a month more than what I’m paying currently on SVR so a fairly hefty increase (although manageable).

Before getting back to HSBC I just thought I’d see if anyone had any words of wisdom or advice on these options. Any advice would be appreciated. Many thanks.

getmore4less

Any tie in on the lifetime tracker.

Follow on rates for the fixes(assume SVR)

What are the overpayment limits on each.

The 80% LTV tracker is base+3.39% so the -ve equity one looks an OK deal for HSBC.

Seems to me the trade off is 2 year on a higher(but fixed) rate to get the SVR followon which is currently lower than the tracker by 0.55%

So you pay 1.5%(variable down) more for 2 years and if the SVR tracks base 0.55% less after 2 years.

How long before your LTV gets you back into remortgage territory?

I would run the numbers with 1.5% lower for 1year 0.75% for the second year overpaying as if you were on the 2year fix and then see how many years at the lower SVR it takes to get back to even.

eg £125599 over 20y @ 5.99 fix for 2y £900pm

after two years £118,655.44 rate change to (5.24%-0.55%) 4.69% new SVR with a 0.75 rise the same as the tracker.

£125499 @ 4.49% £750pm but pay £900
after 1y £120,226.27 then at 5.24%
after 2y £115,616.46

On the lower SVR it is Nov 2018 before you make back the £3k savings.

Vincenzo

2 year fixed, even though it will cost you more now. The important factor here is what your options will be in 2 years time. You may still be in a position where remortgaging is difficult due to LTV. The lifetime tracker is a 3.99% above base, before the financial crisis SVRs were typically 2% above base. My feeling is that the SVR will still be cheaper (possibly by some way) than the tracker in 2 years time but this is pure speculation.

If you are able to overpay to create some equity fast, consider the tracker as I believe there are no ties ins.

On the other hand, if you can easily afford it and wish to stay there long enough, the 5 year options removes risk and surprises for the next 5 years.

I hope it works out for you.