Mortgage deal ends in 12 months - questions

murkins

Hi all,

I borrowed 225k four years ago and rightly or wrongly went for a 5-yr fixed

Anyway next year will be time for me to renew the terms but I've never done this before so I have some very basic questions:

1. Is what I'll be doing termed a 'remortgage' or something else?
2. How soon do I need to start the process.
3. The sum now outstanding is 200k, do I effectively take out a 'new' mortgage on this sum?
4. If I switch banks are they basically buying the loan from my current provider?

Thanks in advance, told you they were basic questions

beecher2

1. It is remortgaging if you're changing lender but not if you're staying with your current provider
2. You can start looking about 6 months before the deal comes to an end
3. Yes
4. You pay off the loan and start again with the new provider.

Just to add, the new lender would use the present day valuation for your house, so work out what your Loan to Value would be - ie 200k/present value x 100. It has to be under 90% to get a deal elsewhere, depending on criteria

Also find out what your present deal would revert to as it might be a better option to stay on the follow on rate

Get a hold of your credit file too in case there are any problems - criteria is much tighter than it was

shortchanged_2

beecher2 wrote: »

Also find out what your present deal would revert to as it might be a better option to stay on the follow on rate

I agree with this. Find out what rate you will go onto with your current lender first, you may find it may be quite low.

In which case you could make overpayments on your mortgage and help bring the capital down. There are many people around who believe interest rates might stay fairly low for some time, but then thats the gamble.

Thrugelmir

shortchanged wrote: »

In which case you could make overpayments on your mortgage and help bring the capital down.

If you have adequate savings then you almost should be using excess cash to reduce your mortgage balance.

As improving the LTV, even with the longer term in mind , will improve the mortgage interest rates you can obtain.

murkins

beecher2 wrote: »

1. It is remortgaging if you're changing lender but not if you're staying with your current provider

4. You pay off the loan and start again with the new provider.

Excellent thanks

Regarding the above statements, if I change provider what sort of charges can I expect?

What do you mean by 'pay off the loan and start again?'. Surely if I pay off the remaining 200k then that would make starting again irrelevant? Not that I have 200k to pay off the rest of the loan

Thrugelmir

murkins wrote: »

What do you mean by 'pay off the loan and start again?'. Surely if I pay off the remaining 200k then that would make starting again irrelevant? Not that I have 200k to pay off the rest of the loan

You will be borrowing money from the new lender under their current terms and conditions with the mortgage product you choose. The new lender doesn't buy your loan from the old one as such. Though there is a transfer of money to settle the debt.

getmore4less

Starting point is the followon rate for the rest of the term on your existing deal.

If that is a good rate there may be nothing to do.

GMS

Keep in mind that your revert rate with present lender will not be fixed so can change either in line with Bank Base Rates/LIBOR if a tracker, or as and when the lender decide to up rates if Standard Variable Rate.

If you prefer the security of a fixed rate then you should look at what is available nearer the time as when rates rise it is highly likely that the fixed rates will do so accordingly.

If your preferred option is a fixed then you may wish to take this option even if the payments are slightly more expensive in order to protect against rises.

It is your personal attitude to risk which would dictate this.

dwsjarcmcd

murkins wrote: »

Excellent thanks

Regarding the above statements, if I change provider what sort of charges can I expect?

Depends on the product you decide on. Look at what your current lender charges now for fixed or tracker rates and that will give you a clue. If you revert to their SVR then there won't be any fees