Fixed term ending - what should we do?

Foggster

We bought our house 3 years ago and got a mortgage with the now defunct Mortgage Express. It was interest only 100% mortgage. Due to personal circumstances at the time, this was our only option and it meant us being able to get on the housing ladder but I do realise 100% mortgages and interest only was risky.

3 years later, we have done quite alot of work to the house, on a budget and with money back from PPI claims. We have added an additional downstairs room, large reception area and bathroom.

I am not daft enough to think we have added loads of value to the house and a sensible opinion is we have maintained the value we bought at.

Mortgage Express has written to us today to notify us that our fixed term is ending and we are now on their variable rate, our payments have gone from £770 to £315.

Our broker has been in touch but he has been very honest and has said we would struggle to get another deal in the current climate and with nothing like the 15%-20% deposit/equity required for a competitive mortgage.

We can easily afford to save the £455 extra each month - do we stick this in our ISAs or look at a savings account? Do we test the water and get a valuation, there have been no similar houses for sale in the last 3 years so difficult to gauge.

Any advice would be gratefully received on this one.

Thanks.

opinions4u

1. What rate have you moved on to?
2. Does it track, or is it set at lender's discretion?
3. Are there any ERCs if you overpay the mortgage?
4. What is the tax status of those named on the mortgage (e.g. 0%, 20%, 40% etc).


(Depending on your answers, piling in to monthly savers at Lloyds or First Direct, or a Halifax ISA may be the way to go).

Gorgeous_George

So long as you can save at a (after tax) rate higher than your mortgage rate then you should do so.

ISAs can pay about 3% but I'd go for the first direct regular saver. £300 per month at 8% (gross) is 6.4% after basic rate tax. When the 12 months that the deal runs for is finished, stick the money in the best cash-ISA you can find or some other product (I'd choose Zopa but this isn't for everybody).

GG

Foggster

opinions4u wrote: »

1. What rate have you moved on to?
2. Does it track, or is it set at lender's discretion?
3. Are there any ERCs if you overpay the mortgage?
4. What is the tax status of those named on the mortgage (e.g. 0%, 20%, 40% etc).


(Depending on your answers, piling in to monthly savers at Lloyds or First Direct, or a Halifax ISA may be the way to go).

1. We have moved from 6.9% to 2.5% and is the lenders Product Variable Rate.
2. I will need to look into this, the documentation is not clear.
3. I will call and ask this question on Monday - the broker seems to think there are no restrictions.
4. I am a normal rate tax payer, my husband is 40%.

Thank you.

opinions4u

Foggster wrote: »

1. We have moved from 6.9% to 2.5% and is the lenders Product Variable Rate.
2. I will need to look into this, the documentation is not clear.
3. I will call and ask this question on Monday - the broker seems to think there are no restrictions.
4. I am a normal rate tax payer, my husband is 40%.

Thank you.

I'm assuming you're with Nationwide or C&G and tracking at 2% above BofE with no ERC. I would stick with this in the current climate, but obviously you should know the risks of rising rates.

I'd suggest you look in to:

First Direct Regular Saver account (8%)
Lloyds TSB Monthly Saver account (5%, allows withdrawals)
Halifax ISA Saver Direct (2.8%-3.0% tax free, allows withdrawals)

Keep an eye on the savings rates compared to the mortgage rates. There will come a point where the mortgage rate increases and the savings rate doesn't - know when to move the funds from savings and overpay a lump sum to the mortgage.

dimbo61

Do you have other savings now ? have you filled your ISA allowance?
As you have managed to pay £770 every month for the last 3 years why not ask your lender to keep your payment static and therefore overpay the mortgage each month and build up a little more equity in the property.
Build up your savings as well Good Luck

Joe_Bloggs

Opininios4U Said:-

I'm assuming you're with Nationwide or C&G and tracking at 2% above BofE with no ERC. I would stick with this in the current climate, but obviously you should know the risks of rising rates.

However it appears, from the first post, that Mortgage Direct are part of Bradford and Bingley who were 100% nationalised .

This is of no importance other than to point out the strange ways that things evolve.

MSE Martin Lewis has thoughts on the overpayments topic.

Do not squander away your good fortune .

J_B. (When in doubt ask questions !)

lovadokrova2010

Foggster wrote: »

We bought our house 3 years ago and got a mortgage with the now defunct Mortgage Express. It was interest only 100% mortgage. Due to personal circumstances at the time, this was our only option and it meant us being able to get on the housing ladder but I do realise 100% mortgages and interest only was risky.

3 years later, we have done quite alot of work to the house, on a budget and with money back from PPI claims. We have added an additional downstairs room, large reception area and bathroom.

I am not daft enough to think we have added loads of value to the house and a sensible opinion is we have maintained the value we bought at.

Mortgage Express has written to us today to notify us that our fixed term is ending and we are now on their variable rate, our payments have gone from £770 to £315.

Our broker has been in touch but he has been very honest and has said we would struggle to get another deal in the current climate and with nothing like the 15%-20% deposit/equity required for a competitive mortgage.

We can easily afford to save the £455 extra each month - do we stick this in our ISAs or look at a savings account? Do we test the water and get a valuation, there have been no similar houses for sale in the last 3 years so difficult to gauge.

Any advice would be gratefully received on this one.

Thanks.

Could you speak to them and see if they'd be willing to change you to repayment rather than interest only - with drop in interest rate your monthly outgoings would likely be the same but you'd be paying the actual borrowed amount. Worth asking IMO

xcapade

lovadokrova2010 wrote: »

Could you speak to them and see if they'd be willing to change you to repayment rather than interest only - with drop in interest rate your monthly outgoings would likely be the same but you'd be paying the actual borrowed amount. Worth asking IMO

Thats very good advice and makes perfect sense.:D

dimbo61

Hi Xcapade and lovadokrova,
It may well make perfect sense but it also means that the poster has to pay a repayment mortgage every month and with rates so low then the mortgage payments will only rise in the next 12/18 months!
If they stray on IO and overpay each month then the debts is reduced and they build up a little equity in the property.