Moving house and base rate mortgage

katie1234

This will sound like a silly question to most of you but this is my first home and I know very little about mortgages!
We want to move house in a few years but are in a lot of negative equity. Our fixed rate ended a year ago so were now on the Halifax equivalent tracker type mortgage I think. Not in a deal just whatever we fell off onto. Fixing would probably be hard for us anyway as I'm sure we'd be offered no deals.
My question is if were still on this non deal when we sell do we have to pay any repayment charges or anything similar to?
Thanks.

Thrugelmir

Firstly. Find and read your mortgage paperwork. This will tell what you current interest rate is.

Secondly. Visit the Debt Free Wannabe board for advice and support on managing your finances and getting to grips with the mortgage.

Thirdly. Overpay your mortgage if you can afford to do so. As ultimately this is the way that you'll get yourselves out of negative equity.

Put moving house on the back burner for the time being.

blueberrypie

katie1234 wrote: »

This will sound like a silly question to most of you but this is my first home and I know very little about mortgages!
We want to move house in a few years but are in a lot of negative equity. Our fixed rate ended a year ago so were now on the Halifax equivalent tracker type mortgage I think. Not in a deal just whatever we fell off onto. Fixing would probably be hard for us anyway as I'm sure we'd be offered no deals.
My question is if were still on this non deal when we sell do we have to pay any repayment charges or anything similar to?
Thanks.

You won't have any early repayment charges because you are no longer in the first part of your mortgage (the fixed-rate bit). But you *will* have to repay the full amount that you owe - so if, for example, your house sells for £100k and you owe £120k, you will have to find the extra £20k to pay off your mortgage - if you don't, your lender will not remove the charge it holds on your house, which means the buyer's lender will not release the funds to buy.

If you want to buy another house, you will have to not just pay off your current mortgage, but also have enough for a deposit so that you qualify for a mortgage on the new property.

Even if you do not move, you are at the mercy of interest rates, as your tracker rate will go up when the base-rate does, and therefore your payments will also rise.

As Thrugelmir says, you need to get savvy very soon - get any debts paid off as quickly as possible, get over-paying on your mortgage, and get out of that negative equity as soon as you can - until then, you don't really have any good options.

beecher2

You're likely to be on Halifax's SVR of 3.5%

Contact Halifax to find out what your options would be if you sold up - I take it you're moving into rented accommodation? And definitely start overpaying as much as you possibly can

katie1234

Thanks for your replies. Technically the bank views us as negative equity even though our house is worth 30k more than our mortgage however we bought the house with a type of shared ownership so if we did sell our house the bank would always get their share 1st so we'd never owe them money. Anything left would go to the government which would have around a 20k shortfall on their share. We don't want to overpay on the mortgage as we are saving instead to pay off the shared ownership.
we would sit tight but being realistic our house would never reach what we paid for it and we would need to do this one way or the other so we think it's better sooner as it's only a small apartment which we've already outgrown.
Many lessons learned from this!!

Thrugelmir

katie1234 wrote: »

We don't want to overpay on the mortgage as we are saving instead to pay off the shared ownership.

Are you savings earning a better rate of interest than paying off the mortgage?

beecher2

You need to find out how you pay back that 20k shortfall if you sell up - have you contacted the agency to ask what your options are? I take it renting a bigger property is your goal?

katie1234

My savings earn barely no interest! We had always planned on putting them in an ISA eventually. We used a good chunk to buy 5% of the governments share in December so it would decrease our rent from them and enable us to save more. We now hav a decent amount to put in an ISA so should probably do so. I always thought that because you pay interest on your mortgage we would lose money by paying extra I.e. If you paid 300 off you would actually decrease the mortgage by less like maybe 290 but maybe this isn't how it works?
We probably will have to rent until we get a deposit together depending on how long the house takes to sell or how much we'll have left in savings. Not ideal but we were always prepared to start right back at the bottom again!

katie1234

They will also only accept a payment in full to allow you to move. They don't do payment plans or anything similar which I suppose is fair.

Thrugelmir

katie1234 wrote: »

I always thought that because you pay interest on your mortgage we would lose money by paying extra I.e. If you paid 300 off you would actually decrease the mortgage by less like maybe 290 but maybe this isn't how it works?

By repaying capital you reduce the interest you pay every month. At the beginning the amounts saved may seem small. However maintain your mortgage repayments at the same level every month and every month less of the repayment will be eaten up in interest charges. Your mortgage interest is calculated daily and charged monthly.

My first property was a tiny flat. I remember thinking at times I'll never move on but I did. Better to stay put and rebuild your equity than waste money on renting and servicing a debt.

beecher2

katie1234 wrote: »

They will also only accept a payment in full to allow you to move. They don't do payment plans or anything similar which I suppose is fair.

So your only option is to devise a plan to pay back the money - I'm a bit unclear as to why you're thinking about Early Repayment Charges when moving isn't an option.

Do you have a 2 bed flat? If so, then think seriously about getting a lodger in. If you haven't already, post a Statement of Affairs onto the Debt Free Wannabee forum - you need to look at your financial budget and get rid of any luxuries such as Sky, holidays etc. You will get this sorted, but only if you have a plan.