what to do with regards to re mortgage?

lorny80

currently we have 37,ooo mortgage, over 25 yrs, and are on a variable at 3.5.
we are looking at tying into a fixed term.
what about of yrs would be best to fix into?
2,3 or 5?
we have been offered 5 yrs ar 4.69. with no fees. which sounds great.
BUT in 5 yrs is the economy going to have had enough time to settl?
we were also looking at reducing the term to 20 yrs.
is that a good idea?
in our situation, what would YOU do?
young family, mortgage, 3 kids, only 1 income.
any ideas?

Wh05apk

You have a relatively low mortgage, so fees will have a disproprortionate effect, therefore, you will be better getting a no/low fees deal even at the expense of a slightly higher rate.

The rate you have been offered looks very good.

With regards reducing the term, that is a good idea if you are confident repayments will remain affordable, another option, could simply be to set up a standing order to overpay for the difference, if things get tough, at least you can stop it.

lorny80

oh, i like the overpayment idea.
the lower rates we were offered, when coupled with the fees, meant on some we would have actually been paying more per month.
also, some fees were upwards of 1400. so a very very large amoun of that mortgage.
is there any indication that variable rates are going to go up in the near future?

Radionotme

Variable rates will definitely go up, as they can't go down. The only question is when and how much (and no-one knows the answer to that!)

lorny80

i understand that knowone knows, but i wondered if there was anything else going on in the mortage markets that might indicate that it will go up soon.
the bank we have had the above offer from, called me to say that the 2 and 3 yr rates were going up. but the 5 yr ws staying at the said rate for now.
many banks and lenders turned us down as the amount we need is too small for them.
and lots tried to get us to add to it!

HappyMJ

I'd stay with a variable rate of 3.5%. That's a good rate.. On £35,000 the absolute minimum you have to pay is interest only of about £100 per month. Nothing can beat that. In fact if you switched the standard variable rate after the fixed term has expired would probably be higher than you are paying now.

kingstreet

Tying yourself to increased payments via a reduced term strikes me as potentially dangerous. You have kids and presumably the same kind of issues as the rest of us - car breakdowns, appliances wear out etc?

If you think you could pay more, why not save the extra money into an ISA. This could be an emergency fund that once a year, if unused, you could use to reduce your mortgage. Most lenders will let you repay 10% of your balance without penalty each year, even if you're in a five year fix.

The mortgage deal seems a great option for you. The only thing you need to consider is what if you need to get out? What are the penalties? Is there any chance you might need to repay the mortgage altogether, perhaps to leave the country? What if you need to move? Is the product portable*, enabling you to keep it on the mortgage for your next home?

*Don't forget the mortgage will be subject to your income, status etc at that time. Porting is not a guarantee the lender will give you a mortgage next time you need one!

lorny80

but we are worried, that if we stick to variable then rates increase, we will not be able to get a fixed for a decent deal. and we really want to know exactly what we have coming out in payments for the mortgage for the next few yrs,( small kids, want to know what money we have etc)

lorny80

kingstreet wrote: »

Tying yourself to increased payments via a reduced term strikes me as potentially dangerous. You have kids and presumably the same kind of issues as the rest of us - car breakdowns, appliances wear out etc?

If you think you could pay more, why not save the extra money into an ISA. This could be an emergency fund that once a year, if unused, you could use to reduce your mortgage. Most lenders will let you repay 10% of your balance without penalty each year, even if you're in a five year fix.

The mortgage deal seems a great option for you. The only thing you need to consider is what if you need to get out? What are the penalties? Is there any chance you might need to repay the mortgage altogether, perhaps to leave the country? What if you need to move? Is the product portable*, enabling you to keep it on the mortgage for your next home?

*Don't forget the mortgage will be subject to your income, status etc at that time. Porting is not a guarantee the lender will give you a mortgage next time you need one!

thanks, i think the idea of keeping it at 25 yrs and having the rest to pay off on a monthly overpayent basis is a great idea. we cant do a yrly overpayment, it would be up to 500 per month, but not as a lump at the end of the yr.
it is portable. so if we have to move, it would be ( hopefully) ok.

kingstreet

Exactly!

Will the average lender's average SVR be more, or less, than 4.69% for the next five years?

If you think it will be lower, you stick with SVR.

If you think it will be higher, you go for the fix.

If you have a family and don't want the worry of what happens if rates do start to rise and you don't know how far they'll go, get the certainty of knowing what you'll be paying and the comfort of your payments not going up. Take the fix.

4.69% may look expensive in the context of the last two years base rates. It looks great compared with those over the last twenty!

dimbo61

If you use "whatsthecost" and worked out how much it would cost to reduce the term to 20 years and put 4.69% as the interest rate you could have your dd set up for that amount. That IS a very good long term fix with no fees.