Offset mortgage unbiased help appreciated.

Coin-purse

I am stuck in a mortgage product until 2012 that will cost me to get out of. Details are:

6.04% fixed in 2007 - 2012. (I know, I know - but things were looking bad then!!) 25yrs term with 22 remaining. Remaining balance 108K

My IFA is telling me I would be a fool not to change it to a more current offset deal and pay/swallow the fees to change NOW!! In other words tage the fees onto my mortgage and take the balance back up to 112K.

Fees will be:

£2350 redemption fee
£995 New product fee
£998 broker and valuation fee

Total: £4343 to change!!!

New deal = 2.99% base tracker for term with no redemption fees or coller.

The new offer is an offset mortgage, I already make regular overpayments and currently paying £1000 a month which, if I can keep at this pace see's off my current Mortgage in 13 years.

My IFA is adamant that if I put the term of the new deal to 12 years and swallow the £4343 fees I will be better off in the long term.

But I am thinking that is a massive gamble as it would only take an interest rate rise of 3% to put me back where I am now? but again I am being told that if rates rise I can port this new product for free to a fixed deal if things start to look bad again.

I am nervous about all of this and could do with some unbiased advice about offsetting my mortgage and the whole concept of spending 4K now to save more money long term??

Any advice would be massively appreciated.:money:

getmore4less

Whats the LTV?

If good enough the First Direct offset will cost less in fees.

based on your numbers and 2 years of the fix left
Current
£108k 22years 2 year fix 6.04% £747pm in 2 years £103,049.28

New
Add on the £4343 fees and 2.99% £581pm in 2 years £104,900.09

pay £747 break even is Feb 2012 16months in 2 year £100,805.95


Whats the followon rate on the cuurent deal If that is a good tracker it might be worth keeping it.


Your broker should be showing you these sort of numbers if they were any good so you can make an informed choice.

Coin-purse

Given current market rates the house is estimated to value at £160K, The follow on rate for current deal is Brittania SVR. Let me digest the above figures (ie try to understand them properly!!) before I reply with stupid questions. Massive thanks for putting the figures down for me - I am useless with this sort of thing, but trying to get better...=]

_Andy_

The broker fee is pretty high.

Coin-purse

_Andy_ wrote: »

The broker fee is pretty high.

The broker "Admin" Fee is £499. The £998 figure quoted above is made up of that plus another £499 legal and valuation fee.?

Coin-purse

getmore4less wrote: »

Your broker should be showing you these sort of numbers if they were any good so you can make an informed choice.

That is also a jolly good piece of advice - Thankyou - at no point was I given an equivelent break even figure - and the 2.99% is plus base rate of 0.5% so total 3.49% I think?

It's a lot closer to call this than I first thought. It looked like a cut and dry case while he was here, but on further investigation I am also seeing equivilent fixed rates that could be worth looking at?

On the "Off Set" front. Are they just a gimmick or is there real saving to be had? Any general riles I should be adhereing to with off sets?

Again - Thanks in advance.

getmore4less

Coin-purse wrote: »

That is also a jolly good piece of advice - Thankyou - at no point was I given an equivelent break even figure - and the 2.99% is plus base rate of 0.5% so total 3.49% I think?

FIX the previous post got the initial monthly wrong a bit. and do the new rate for the offer.

based on your numbers and 2 years of the fix left

Current
£108k 22years 2 year fix 6.04% £741pm in 2 years £102,977.78

New
Add on the £4343 fees and 3.49% £581pm in 2 years £105,307.30

pay £741 break even is July 2012 21 months in 2 year £102,060.81

This is so marginal I would not take this offer it is easy money for the broker and all the risk on you.


It's a lot closer to call this than I first thought. It looked like a cut and dry case while he was here, but on further investigation I am also seeing equivilent fixed rates that could be worth looking at?

On the "Off Set" front. Are they just a gimmick or is there real saving to be had? Any general riles I should be adhereing to with off sets?

I love the offset, they give a lot more flexability and access to overpayments is easy, the margins over a standard tracker are much lower now so can be worth the slight extra cost.
ALSO if you can find free money like 0%CC(purchases) then you can Stooze. great place for the emergency funds, my rate is now so low that I have taken money out to put in savings where I get 1% over the mortgage rate. General rule is the same as all mortgages pay them off quickly it's debt, handy thing is you can get the money back without asking, there is a risk with flexable trackers that they withdraw the drawdown of overpayments.

Again - Thanks in advance.

OK you have £108k on £160k thats 67.5% LTV

that would give you first direct 75% LTV base + 2.59% £99 fee

£2350 redemption fee
£99 New product fee
£499 [STRIKE]broker[/STRIKE] and valuation fee

£2948

Current
£108k 22years 2 year fix 6.04% £747pm in 2 years £102,977.78

FD
Add on the £2948 fees and 3.09% £580pm in 2 years £103,679.21

pay £741 break even is OCT 2011 12months, in 2 year £99,690.80

Now that is a risk worth taking pay back in a year and lower rate ongoing giving a potential £2k saving in 2 years, if base rates go up after a year they have to go UP over 2.6% to 3.1% to loose out by end of year two.


Get your LTV down to 65% with some other funds and you might get the base+2.09% rate break even is 2 months earlier.


Looks like you have a duff broker

Coin-purse

getmore4less wrote: »

OK you have £108k on £160k thats 67.5% LTV

that would give you first direct 75% LTV base + 2.59% £99 fee

£2350 redemption fee
£99 New product fee
£499 [STRIKE]broker[/STRIKE] and valuation fee

£2948

Current
£108k 22years 2 year fix 6.04% £747pm in 2 years £102,977.78

FD
Add on the £2948 fees and 3.09% £580pm in 2 years £103,679.21

pay £741 break even is OCT 2011 12months, in 2 year £99,690.80

Now that is a risk worth taking pay back in a year and lower rate ongoing giving a potential £2k saving in 2 years, if base rates go up after a year they have to go UP over 2.6% to 3.1% to loose out by end of year two.


Get your LTV down to 65% with some other funds and you might get the base+2.09% rate break even is 2 months earlier.


Looks like you have a duff broker

I don't even know where to start with regard to thanking you. Your advice about the deal on offer being marginal easy money for the broker has really hit home.

Thankyou so much for taking the time to put the figures in black and white for me. I am not adverse to paying brokers for good advice and I appreciate that peoples time is not free - however - the chap also tried to give me the hard sell for an up front Managed mortgage service fee of £2499 on top of the rest of the fees above!!! In fact he had already added it and another £998 of fees for a managed Will service into my monthly payment in his first so called "Financial plan". It was at that point that I realised I was not dealing with a proffessional outfit. (no personal disrespect meant to the individual)

The more I examine the details (or lack of) left behind I am in total agreement with your final sign off.

Sir. If you perform this sort of service for a living, please feel free to PM me your contact details.

Thanks again.:beer:

getmore4less

Coin-purse wrote: »

Sir. If you perform this sort of service for a living, please feel free to PM me your contact details.

Thanks again.:beer:

Sorry no help there, but I think you can do this yourself if you have some time.(just ask the questions, or put some of your working for review/check)
Plenty here will follow up if needed.

In my view the average intelligent person can do most of this mortgage stuff if they just spent a bit of time thinking about it, none of it is that hard once you grasp the basics and work through a few what if's.
It is so important to understand what will be the biggest cost in most peoples lifes, multiple of gross annual income.

Problem is people get a loan and then forget about it till next time/or difficulty then spend little time looking at the next deals and do the same again.

Once you are on sensible LTV, reasonble salary multiples and manage your finances well there is little need for a broker/IFA the direct deals are good enough and often better than a broker/IFA will get on commision based work anyway.


There is a tendancy to scare people into fixed deals but rarely does the follow on seem to be considered/risked properly.

The power of getting the cheaper deals and overpaying also seems to be overlooked.