Another interest rate thread - fixed rates

Thrugelmir

dantheman2010 wrote: »

Thats worth a thought but if I only get say 6 months of low rates and have over paid say £300 a month (about what I could afford), thats on £1800 which wouldnt do anything to my LTV really, I would rather have £1800 in my pocket towards any rate hikes, if I am making sense.

I understand where you are coming from.

Regarding your LTV. If you fix now then potentially you'll repay less capital off your mortgage. Then if you did overpay by the £300.

Remember mortgage interest is calculated monthly. So your £300 will slowly compound the interest saving over the months and accelerate the speed of repayment.

There's an old Chinese proverb. "A man who wishes to move a mountain starts with the small stones first". A useful thought.

dantheman2010

Thanks, there is no fee for fixing for the 5 years. Have already checked that.

My point about overpaying I raised earlier, if I only get say 6 months before a massive hike then I would have only cleared £1800 which is nothing off the total balance, not enough to bring me into a new LTV bracket.

If I new I could get perhaps another good year or two with the BofE being less than 3.75% than yes over paying would be better.

dantheman2010

If I fixed now I would pay less off as that 5.79% is interest only.

Burridge60

You have now used the swear words interest only! But forgiven the blasphemy if you have an adequate repayment plan in place which you can rely on (crosses fingers and looks skyward).

If you don't. Then you need to examine the "true" mortgage cost by looking at a proper capital and interest mortgage and then worry about interest rate rises.

Thrugelmir

dantheman2010 wrote: »

My point about overpaying I raised earlier, if I only get say 6 months before a massive hike then I would have only cleared £1800 which is nothing off the total balance, not enough to bring me into a new LTV bracket.

The impact of rising interest rates will more than likely put further downward pressure on property prices. In which event your LTV is going to worsen.

To improve your LTV , making capital repayments is the only option.

dantheman2010

Which I cannot afford to do. The reason it is interest only is because at first it was a rental property and I then moved back into it a few years ago. It wasnt (and perhaps isnt) the house I intend to grow old in (I have only just turned 27) and if I do at some point decide to stay then once my current loan (the reason I cant afford to go on a repayment mortgage) finishes I would then look at changing to repayment.

Thrugelmir

dantheman2010 wrote: »

If I fixed now I would pay less off as that 5.79% is interest only.

Suggest you pay a visit to the Debt Free Wannabe board. Plenty of support there and ideas as to how to tackle one's personal finances.

Your first priority needs to be to set a repayment plan in progress for your mortgage.

£300 a month would be a good start in moving the mountain. Reducing your expenditure elsewhere for a period of time would accelerate the reduction in debt.

dantheman2010

I may look at matching my payments on the SVR for now, so as its currently £215 pay that + an extra £215, then save the difference, when the rate goes up pay the new rate + same again, saving less to cover the difference.

OR is it possible to be on a repayment mortgage but just on the SVR? They said yesterday at C&G I just have to ring up and move over to repayment rather than interest only - but we only ever talked about fixed terms not SVR's it possible or should I just do what I said above?

Thrugelmir

Is downsizing to a smaller property with a smaller mortgage an option for you?

As its hard to see how you are going to break the circle. If money is already tight.

Remaining on interest only is little more than renting.

dantheman2010

Nope, thats not an option, well it is but not one I am willing to undertake.

But I think I am down to two choices;

1. Stay on the SVR and over pay, as its £215 pay £215 extra, save any extra I have, as it increases increase the extra payment whilst reducing the extra I was saving to compensate

2. Fix on a repayment mortgage, meaning a higher amount a month, think they said something like £600 per month for 5 years

Then either way I will have cleared some of the mortgage and with option 2 my loan would be near enough done when the fixed term ends leaving me with an extra £350 per month.