what to do with regards to re mortgage?

lorny80

ok, so i think i have decided..do it for 5 yrs at 4.69 over 25 yrs, they have given me the 2 different payments options, one(20 yrs) is £240 and one is £210.(25 yrs)
so we can go for 25 and pay 210 and add 30 or 50 to it every month until we feel that we cant afford the extra, ( hopefully wont happen)

kingstreet

lorny80 wrote: »

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.

It is likely you will have to pay the overpayments on a regular/agreed basis, perhaps by direct debit.

You can put money in an ISA when you can afford to, without being tied and you can vary how much you put in each month, quarter etc. What you have in the ISA can then be used for emergencies, or if untouched used to make a one-off payment each year.

lorny80

that makes sence, have it there to use as a top up mortgage fund or as en emergency fund?

Radionotme

we cant do a yrly overpayment, it would be up to 500 per month

I'm guessing it's a Nationwide mortgage, so you can easily vary the amounts.

kingstreet

lorny80 wrote: »

that makes sence, have it there to use as a top up mortgage fund or as en emergency fund?

Exackly! More control. More flexible. Once it's paid off the mortgage it's a hassle if you need to borrow it back again in an emergency. When the kids are older, that may be the time to increase your mortgage payments because your finances will be more stable and you can safely agree to fixed overpayments.

lorny80

kingstreet wrote: »

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!

ok, im stupid.....i dont know the answers.

kingstreet

If it is Nationwide, you'd spread the payments over two or three months so you'd avoid exceeding the £500 per month overpayment limit.

Radionotme

No-one does, whatever decision you take, it's effectively a gamble.

I was in your position just over 3 years ago and took a 5 year fix as rates were on they're way up (May 2007). You can argue whether a fix was calssed as gambling or not, but I certainly lost compared to all those who were taking trackers.

The situation is a little different now as rates can only go up - however how far and how fast is the bit that's unknown.

kingstreet

lorny80 wrote: »

ok, im stupid.....i dont know the answers.

Nah. You're not. Trying to second guess what interest rates will do is the job of blokes in pin-stripe shirts in offices in Canary Wharf.

The rest of us have to make decisions based on our needs and circumstances.

If you worry that rising interest rates might leave you struggling financially, you take the option which will stop that worry, the fixed rate.

Some people have been lulled into low variable rates for a couple of years and think they'll go on forever. If you're paying the standard rate of 3.5% now, it won't take much for that rate to go up past the fixed rate you can take now.

dimbo61

If your SVR is 3.5% you only need 2 rises of 0.5% before you are very close to the 5 year fixed deal so do you think there will be a rise of 1.2% in the next 5 years! I do.
I have just finished a 5 year fix and am sitting on a tracker deal but rates would need to go over 3.5% before I would be better on a fix!
3 young kids and one income !!!! I would take the long term deal over 25 years but overpay each month like it was 20 years. ( builds up an overpayment fund ) GOOD LUCK to you and your family