what happens when i remortgage

craig_1983

hello, i bought my first house about 18months ago. the deal i got was with co-op...

mortgage taken out over 25years
5year fixed rate at 4.99%
borrowed 90k
house valued at 120k

the first few 5/10 years you pay back alot of interest. at the end of the 5years my mortgage amount remaining would be 80k over 20 years.

my question is... if i remortgaged with a different company, will i be paying more repayment and less interest because the 5 years that i had with co op i payed a decent amount of interest beacuse the first 5/ 10 years you pay alot of interest back. hope its not to confusing...:mad:

dimbo61

If you read the paperwork that came with your mortgage offer RE Early Repayment Charges you will find that you have fees to pay if you want to get out early!
Now well done on putting down a 25% deposit and not paying any stamp duty when you purchased your first home.
You have a good long term deal at a good rate!!! and I doubt very much if you would get a better deal after paying the ERC, survey fees, legal fees, and fees to get another mortgage.
What you can do is overpay the mortgage you have !!! If allowed Check with your lender first
Every penny you can overpay will be saving you 4.99% TAX FREE

kingstreet

If I understand the question correctly, you are wondering about how you get around to repaying the capital if you move your mortgage a couple of times?

A repayment mortgage works by charging you mostly interest in the early years so your balance doesn't reduce by much. In the later years, notably the last five to seven years, you probably repay half the mortgage advance in that time.

If you remortgage, or move house, five years into a twenty-five year term, you'll start all over again if you take your new mortgage over twenty-five years. You must take your new mortgage for the remaining time you had left on your earlier mortgage, so twenty years would be the appropriate time for the example I gave earlier.

What I suggest is you try to keep a particular age in your head for the time you want your mortgage paid off. If you're 30 and want it paid off by 55, you'll have to go for 25 years now. If you move in 2 years, you then have a 23 year mortgage term. A remortgage after another 5 years, means a new term of 18 years. Obviously overpayments can reduce the term (or the monthly payment in future - your choice) but broadly speaking you should avoid "resetting the term" back to 25 years, effectively wasting the money you pay in the early years over and over again.

Hope that was what you needed.

craig_1983

thanks for your replies. im looking to see out my current 5year fixed deal with co-op.

after that ill have 80k left over 20 years. now if i switch to a different company....wil i be paying off more interest in the first several years??ince again thanks for your patience

Engeroosi

You pay the same amount every month regardless of what stage you are at with your mortgage. ie year 1 you pay 500 Per month(400 interest 100 capital) then in year 14 you still pay 500 per month( but now it 250 interest 250 capital) then in year 25 you still pay 500 per month( 20 interest 480 capital)

These are just examples to show you the general mortgage principle. Because you are paying a small amount off the capital at the start the amount you still owe gets less therefore the interest slowly gets less which in turn means you pay off more capital. If you can afford to overpay at all in the early years it will make a big difference to the time you take to pay your mortgage off.