End of fixed rate preparation

danzx2

Hi Guys,

Jan 2012 my current mortgage deal ends. I'm currently on a 5 year 5.49% fixed rate interest only deal.

LTV was 95% in 2007. I've made no payments in that time and the balance is £141500. I expect the house could sell for 3-4K more than I purchased it for so about £152000.

I've called my current lender, Standard Life who advise that at the moment they have no deals for me and that I would move to the variable at 5.54%. This may change in 9 months but I want to prepare.

What would be the best way forward?

1. I could change now to a repayment for a £30 fee and try to bring the balance down.

2. Save like mad and review nearer the time.

3. ???

I would ideally like to get another fixed deal and start making repayments but it would need to be close to the current rate and I have a feeling I won't be able to get anywhere near this.

Any advice is appreciated.

Thanks in advance,

Dan

noodle

danzx2 wrote: »

Hi Guys,

Jan 2012 my current mortgage deal ends. I'm currently on a 5 year 5.49% fixed rate interest only deal.

LTV was 95% in 2007. I've made no payments in that time and the balance is £141500. I expect the house could sell for 3-4K more than I purchased it for so about £152000.

I've called my current lender, Standard Life who advise that at the moment they have no deals for me and that I would move to the variable at 5.54%. This may change in 9 months but I want to prepare.

What would be the best way forward?

1. I could change now to a repayment for a £30 fee and try to bring the balance down.

2. Save like mad and review nearer the time.

3. ???

I would ideally like to get another fixed deal and start making repayments but it would need to be close to the current rate and I have a feeling I won't be able to get anywhere near this.

Any advice is appreciated.

Thanks in advance,

Dan

What's your reason for thinking you could sell the property for more than you bought it for? Most properties bought in 2007 are now worth less, and mortgage valuations seem to be erring on the side of extreme caution.

You're right to be thinking about this now - as you are probably not going to be in a great position when your fix ends. I'd definitely advise that you save as much as you can and/or start making capital payments - you almost certainly need to get your LTV down to 90% stand a chance of getting onto a fix equivalent to your current rate. You also need to plan for what you do if moving onto the 5.54% SVR is the only game in town.. can you afford that? what if base rates have gone up a couple of notches by then? If we're starting to push the boundaries of affordability then get an exit strategy in mind just in case.

originalmiscellany

I would say:
Overpay/oversave as much as you can... I would suggest that it's in your interest to save as much as you can by January 2012 to save in a high interest account in the short term and then to "dump" on the mortgage before you re-mortgage in 2012.
It appears most people feel that their house is "special" and somehow not devalued since 2007 - I'd be honest, and look to see how much houses close to you have actually sold for - to get a realistic price.

How come you've not overpaid/saved in the past few years? The point of interest only is that you have a repayment vehicle in place which allows you to clear the capital...

shortchanged_2

Sorry danzx2 but you sound like you are may possibly be one of the negative equiteers that will be stuck in a bit of a rut.

You are on IO and it sounds like you cannot really afford the mortgage you are on as you have not contributed anything to a repayment vehicle, overpayments or savings.

I think really you need to get onto a repayment mortgage which will probably set you back more than £200 a month. Can you afford that?

As noodle stated it is highly unlikely that your house is worth more than when you bought it in 2007.

danzx2

Thanks for the replies so far.

Regarding current house price, I am only going from the most recent house sale of a like for like house near me. £157,500 in 01/2011. My house has a single story extension and is only 1 of 2 that I know of around this area that has one. I’ll have to check what that house actually has. No other houses have sold since 2008.

I’ve not made any payments for a number of reasons. Renovating the house, having a baby and another on the way. Living rather than saving. I should have but it is too late now.

My aim is to get to 90% LTV if at all possible so will be saving as much as possible. I could afford payments on 5.54% but will need to review the rate and free money closer to the time.

I asked about swapping to a repayment and they have advised it would be £759 a month, this is £112 more than I pay now. I can afford this.

You mention exit strategy, I guess this would mean selling?

Thanks again

beecher2

danzx2 wrote: »

Thanks for the replies so far.

Regarding current house price, I am only going from the most recent house sale of a like for like house near me. £157,500 in 01/2011. My house has a single story extension and is only 1 of 2 that I know of around this area that has one. I’ll have to check what that house actually has. No other houses have sold since 2008.

I’ve not made any payments for a number of reasons. Renovating the house, having a baby and another on the way. Living rather than saving. I should have but it is too late now.

My aim is to get to 90% LTV if at all possible so will be saving as much as possible. I could afford payments on 5.54% but will need to review the rate and free money closer to the time.

I asked about swapping to a repayment and they have advised it would be £759 a month, this is £112 more than I pay now. I can afford this.

You mention exit strategy, I guess this would mean selling?

Thanks again

If you can't afford £112 a month, I don't see how you can hope to get the LTV down. Go onto the Debt Free Wannabee forms for help with budgeting as maybe there are things in your household budget which can go, ie cancel Sky, gym membership, forget about holidays. They'll give you good advice over there.

Gorgeous_George

You need to overpay by £2,500 per month to stand a chance of reaching your desired LTV. If you cannot do this, keep your fingers crossed that 100% LTV deals return to the market but don't expect favourable rates.

Is there any family who could help? Perhaps parents could increase their mortgage to 60% at a favourable rate freeing up equity to enable you to qualify for better deals.

GG

danzx2

I said I CAN afford £112 a month.

I've worked out roughly I could save about £4.5K in the next 9 months.

My outgoings are all house related and I watch my money very closely.

So if the house is the same value as it was in 2007 149K, and I could save £4.5K I could be at 92% LTV.

We could ask family for a few £K to make it to 90% if we had to.

Gorgeous_George

danzx2 wrote: »

I said I CAN afford £112 a month.

I've worked out roughly I could save about £4.5K in the next 9 months.

My outgoings are all house related and I watch my money very closely.

So if the house is the same value as it was in 2007 149K, and I could save £4.5K I could be at 92% LTV.

We could ask family for a few £K to make it to 90% if we had to.[/QUOTE]

That sounds like a plan.If they can lend it to you now there will be less questions asked about where it came form and whether or not it needs to be repaid.

With luck on your side, a 90% LTV mortgage will become available at a good rate.

GG

beecher2

danzx2 wrote: »

I said I CAN afford £112 a month.

I've worked out roughly I could save about £4.5K in the next 9 months.

My outgoings are all house related and I watch my money very closely.

So if the house is the same value as it was in 2007 149K, and I could save £4.5K I could be at 92% LTV.

We could ask family for a few £K to make it to 90% if we had to.

sorry - I totally misread your post. I'd still post a Statement of Affairs to the Debt Free Wannabee forum for help.