End of Yorkshire Building Society 5yr fixed

chris_elevate

Hi,

We're coming to the end of a 5yr fixed (4.5%) deal on the 31st Dec. We bought our house for 220,000 and put in 20,000 to secure that rate. At the time it was a good deal for us as we had one income as one of us was at university, therefore living off one income was tight but nice to know our mortgage payment going out would remain the same.

Due to recent family bereavements we got the balance down to £120,000 and when an assets sells will have another 70-90k to take off that. (I'd rather have my Dad still with us than his inheritance but life can throw some pretty tough things at you at times).

Now my wife and I are both working full time it's not such an important thing to have a fixed rate and when the asset sells we don't want redemption fees to put the money into the house.

Looking back in hindsight is a wonderful thing I know but was the 5yr fixed at 4.5% a good thing for us?

Secondly what should we do now?

Thanks for your time and help

getmore4less

I think you probably made a good call, your income was limited and you knew that once you both were working it would become easier so a short term fix of 5 years made good sense.

Looking forward

Probably an offset tracker would be something to look at.
with your LTV the first direct 60% LTV offering will be a good starting point as a reference for the other offset to better.

Total flexability and since you will now need to start considering long term savings/investments you can move money out of the offsets if you find something that meets your long term needs.

Also handy if you get more than you need you then build up a moving fund in the offset that reduces the need for further borrowings by porting the existing loan/offset total.

Are either of you* or likely to become a 40% tax payer then ISA's become an important part of long term planning and you need to start filling them long before the mortgage is paid off if your future surplus income exceeds the annual allowances.


*probably you are given a £200k mortgage

dwsjarcmcd

In your situation I'd be tempted to look at an Offset mortgage because of
- Your future asset value which can be used to pay your loan (or just kept as a future liquidity)
- The ability to overpay as much as you want
- Most don't have redemption charges (but check) if they are tracker / SVR products

David

luckyfool

You can also get some offset fixed deals out there, useful if you would prefer to know exactly what your outgoings are going to be.

opinions4u

chris_elevate wrote: »

Looking back in hindsight is a wonderful thing I know but was the 5yr fixed at 4.5% a good thing for us?

It sounds like a cracking deal for 2005! Additionally, their SVR is now 4.99%, so I think you called it right.

To be honest, there's no point beating yourself up over it.

Secondly what should we do now?

Offset. Lots of lenders offer them, with First Direct one of the more popular ones.

chris_elevate

Thanks for your help guys!

So an offset mortgage sounds like the best option for us?

What sort of interest rates are there out the at the moment? I'm guessing that sticking with Yorkshire BS isn't [FONT=&quot]necessarily[/FONT] the best/cheapest option?

Overpaying every month and then when I get the money from the remaining asset of my fathers I could pay it all in at once.

You mention ISA's etc.... yes my wife is ALMOST a 40% tax payer but with me being a teacher I'm nowhere near that point yet!

Thanks again for your help

luckyfool

If you have kids in childcare or about to go into childcare then worth ensuring your wife at least signs up to get max childcare vouchers. a) Will avoid coming changes to the vouchers which make them less valuable, and b) potentially stops her becoming a higher rate taxpayer which would obviously involve more tax and losing child benefit in the future. For same reasons its worth doing other stuff to try to ensure she does not become a higher rate tax payer (at least unless/until her income would be significantly above the threshold) such as salary sacrifice for her pension etc.

chris_elevate

We don't have kids at the moment.

Not sure what you mean when you refer to 'salary sacrifice for her pension'

thanks

luckyfool

Salary sacrifice is unlikely to be available if she works in the public sector. Effectively you "sacrifice" part of your salary in return for your employer making higher pension contributions (including NI that would have been paid). The benefit is the saving on both your and your employers NI contributions over and above the income tax relief. It's something that may be important for people who are Higher rate tax payers by a relatively small amount given the pending Child Benefit changes and might be a way of avoiding the impact.

chris_elevate

She works in the private sector. Pays her normal tax and ni but she has just recently started paying into a company private pension.

Thanks

luckyfool

They might do salary sacrifice, should mean higher pension contributions being made than otherwise, though technically her headline basic would reduce.

Remember the higher rate threshold is being cut in the next few years dragging more and more people into the higher rate tax bracket.