Advice please ....

Jamrock

Hi All,
I am currently paying off all my debts and trying to repair my credit. By the beginning of May I will only have one outstanding debt. A loan which ends in Feb 2012, at 2.5% interest 450pm.
I have a BTL mortgage with Chelsea BS interest rate 5.8%. It is off the fixed rate and on variable now so payment is 759 interest only. (Am no longer renting so it has been changed to residency mortgage). I now want to move onto repayment and get on a better rate as quickly as possible. (Credit check allowing!!)
I thought maybe stay put with Chelsea and just overpay as much as I can each month with a view to remortgaging at a lower loan to value rate once the rates start rising. I will be able to overpay 750pm.
Or I read it somewhere on this forum try asking Chelsea if they will lower interest rate so that I stay?
I thought maybe I could get one of those mortgages that allows you to overpay with the option of taking it back out if needs be as I don’t have any savings as I have been just throwing it all at the debt.
I really don’t know what to do for the best any advice gratefully received.
Jamrock

Caroline73_2

If it were me - and I am not one of the experts here. I would overpay your loan to get it out of the way (despite it being a fantastic rate) and then remortgage - shop around for the best deal. That's how would work it personally, it's not a financially sound way but it's how I work!

When you remortgage take into account penalties for overpayments, or limits for overpayments, check whether you can get back any overpayments.

dimbo61

You dont give the LTV or income and if your credit score is good/poor.
You wont get 5.8% from savings and i can see caroline73 reasons for clearing the loan ASAP but that is at a low rate of 2.5% and will finish in 11 months.
First port of call is chelsea and ask if they have a better deal and can you change to repayment which they may well want you to do!
Use " whatsthecost" to work out your payments on repayment and look at the chelsea website to see what rates they have for existing customers.
Overpay if you can afford to and maybe wait until next feb when the loan has been paid

Jamrock

Many thanks for replying Caroline and Dimbo. The outstanding mortgage is £157k I bought the property in July 2006 for 185k. My credit score with credit expert was poor in May 2010. Checked in November and it was very good at 999. I have not missed any payments or been late in paying for the last 10 months. I earn circa 40k. I will give Chelsea a call and see what they say.

Jamrock

dimbo61

so if the property is worth the same as when you bought it then you have a LTV of about 85% and chelsea BS have a 85% deal for 2 years at 4.89% with no fee and even better deals if your LTV is 75% both 2 and 3 years.
it would cost about £908 a month at 4.89% for £157K over 25 years on repayment

Jamrock

Many thanks for the advice. Think I will pay off the loan first then focus on mortgage.

Jamrock

dimbo61

Well credit score allowing I am not sure if thats the best course of action.
Your loan is only 2.5% and if you can move to a 2/3 year fix with Chelsea now at 85% LTV or better still 75% LTV the repayment mortgage would only be about £150/200 extra a month.
Now you say you have £750 spare each month to OP and you could split the money say £250 for the repayment mortgage, £250 for savings pot in cash ISA,s and ££250 to clear the loan quicker if ALLOWED.
In 2/3 years you will be debt free except the mortgage and if you take the right deal with Chelsea you maybe able to overpay while on the fix

Jamrock

Many thanks Dimbo. I have spoken to Mortgage company and they said my LTV is 86% the loan is actually 157,700 I will pay the extra to get down to 85% and go onto the 2yr fixed @ 4.89. I can overpay a max of 10% per month without penalties which will knock off over 2years. They said I would only have to pay £50 admin fee which suits me fine. I don't know if they will do another credit check - hoping they wont as they said they can send the offer out and it would only be open for 14 days to accept.

Jamrock

SeriouslySeekingtoSave

That's a good result and will save you a lot of money. Good luck.

Jamrock

I've spoken to Chelsea BS and I will not be credit checked & just have to pay £50 admin fee to switch which is brilliant. Now I need to pay asap £1700 to bring it down to 85% LTV. Hoping I will be able to do this before the rate changes! Fingers, toes, legs and everything else crossed!

J