Brain ache!

Monkeymagic

Hi all

I could really do with some help as I am giving myself brain ache going over and over things.
Our 5yr fixed deal ends on new years eve with Alliance & Leicester. The o/s figure at that time will be £152k and we will then 'roll on' to their tracker which is 0.75% above the base rate. To me, this seems bloomin fantastic as our payments will decrease by some £250pcm.
However, my normal sensitive side is worrying about what happens when the rate goes up? I queried what fixed rates were available and they were pretty much what we were on (4.4%) or slightly les if want to pay a big fat fee.
My heart tells me to sit tight on the tracker, as surely interest rates will need to rise quite sharply for me to be worse off, but still nervy about the uncertainty.
To complicate matters, DH is self employed and has had a very dodgy accountant so would have real difficulties proving income which I am assuming means I need to stay put with current lender anyway?
And just for the final twist, could really do with borrowing an additional £15-£20k as 5 years after moving in we are still living with the previous occupants 20 year old oven and faux brick fireplace!

So, to summarise, do I stick with the tracker, and if the answer is yes, do I save the £250 extra to go towards the renovations, or get a short term bank loan (in my name only), or ask for extra mortgage and use the money to overpay on it?

See why my head hurts?!:o

Any advice gratefully received x

mambo69

New oven £500 so can be obtained in Feb or March. New fireplace? depends how much you want to spend i guess

Monkeymagic

mambo69 wrote: »

New oven £500 so can be obtained in Feb or March. New fireplace? depends how much you want to spend i guess

If only it was that simple, the whole downsatirs needs renovating. we have done upstairs but it is the type of house where you peel the wallpaper and half the wall comes with it. Kitchen needs ripping out and replacing, all walls need plastering at least and at worst to have all plaster boards replaced. Also got 2 flat roofs need stripping and re-doing, 4 windows to be replaced and electrics need looking at

Peelerfart

Monkeymagic wrote: »

If only it was that simple, the whole downsatirs needs renovating. we have done upstairs but it is the type of house where you peel the wallpaper and half the wall comes with it. Kitchen needs ripping out and replacing, all walls need plastering at least and at worst to have all plaster boards replaced. Also got 2 flat roofs need stripping and re-doing, 4 windows to be replaced and electrics need looking at

Would we be right in assuming that your OH isn't a self-employed builder then ?

Tabatha_Kitten

This is what I have chosen to do if it helps Monkeymagic.
I have a similar dilema although slightly different circumstances.
I have no debt, but also very little in the way of savings and loads needing to be done on the house.
I have two mortgages (due to house move), one fixed at 5.78% until around 2013 and the other now reverted to BMR at 2.5%
I too am scared for the future so I have decided to put up with the state of the house for now - see if we all manage to come out of this huge mess we're in in one piece -and am splitting any extra money have between saving an emergency fund and overpaying the higher rate mortgage, safe in the knowledge that I could get those overpayments back if I need to. Im also keeping a close eye on rates ready to jump onto another fix quickly and hope Im not too late !

blueberrypie

Question for the OP: what is the property worth? (And is this your own guess, an estate agent's estimate, or what?)

dimbo61

The tracker deal is to good to lose or give up.
Now if you are worried about future interest rate rises then ask your lender to keep your payment static at the current amount ! that way you are overpaying each month and even if interest rates do go up they will have to rise above 4% before your mortgage payment goes up!

Gorgeous_George

It is anybody's guess what Ant n Dec at No 10 will do next. My guess is that base rates will remain low for at least 5 years so fixing would be pointless. But that is my guess and I wouldn't spend £15k on a new oven and fireplace. FWIW, I wouldn't have bought a house that needed £15k of work with a huge mortgage neither.

If you stick with the tracker, do not overpay. There are plenty of accounts, including one that pays 8% net gross (:)) (first direct regular saver). Save the money at net rates higher than 1.25% and you are quids in.

GG

Monkeymagic

blueberrypie wrote: »

Question for the OP: what is the property worth? (And is this your own guess, an estate agent's estimate, or what?)

Thanks all for responses. Blueberrypie, we bought the property for £214k 5 years ago. I had a look at one website which calculated the value today based on what properties have sold for over the last 5 years and it came out at £235k as avergae for the street. I appreciate that is not accurate as doesnt necessarily reflect what would sell for today, though would use that as my estimate as ours the only one in street with great big extension.
Just a note for those that think we were foolish to make the financial decisions we did, at the time we were far more financially healthy, and anticipated funding the work ourselves gradually. like many others our income has dropped dramatically hence this situation. The work the property needed was reflected in the price.

blueberrypie

Gorgeous_George wrote: »

There are plenty of accounts, including one that pays 8% net (first direct regular saver). Save the money at net rates higher than 1.25% and you are quids in.

Just a note - the FD Reg Saver is 8% gross, not net.

blueberrypie

Monkeymagic wrote: »

Thanks all for responses. Blueberrypie, we bought the property for £214k 5 years ago. I had a look at one website which calculated the value today based on what properties have sold for over the last 5 years and it came out at £235k as avergae for the street. I appreciate that is not accurate as doesnt necessarily reflect what would sell for today, though would use that as my estimate as ours the only one in street with great big extension.

Okay, so you will owe £152k on a house that's probably worth something between £214k and £235k. That puts your LTV at that time somewhere between 65 and 70%.

The lower your LTV is, the better your mortgage options - and the changes tend to happen at the "5s" - i.e. 60%/65%/70% etc. Borrowing extra now might mean that when you come to move, you have a higher LTV than you would have otherwise - thus ruling out the best rates. Just something to bear in mind.

Personally I'd make a list of what needed done and split it into three parts: things that need done before they cause more damage (e.g. leaky roof), things that will need done at some point, and things that would be nice to have done but are essentially cosmetic (new fireplace falls into that group - as does the oven for as long as it's still functional!) Then I'd use the savings on the monthly mortgage payments to do the most urgent work. I wouldn't be borrowing more to do anything that wasn't necessary - and you might put in a new (and expensive) fireplace only to find that your buyer doesn't like it and wants to replace it anyway.

If I absolutely had to borrow, I would do it separately from the mortgage, because the tracker-rate is, as dimbo61 says, too good to lose. Keep it for as long as you possibly can.