Potential remortgage -= help with maths appreciated!

BigLad_2

Hi folks,

I'm considering re-mortgaging. To me it looks like a good move - but maybe I've overlooked some potential fees or pitfalls...? Your help is appreciated...

Property / Balance
Balance = 66K
Property value = 90K
LTV = 73%
2K overpayments are being made monthly with the aim of repaying the mortgage in a few years.

Current Mortgage:
NRAM
Rate = 4.54% (their SVR for 'loyalty' customers)
Interest calculated daily but added once per month on 1st of month
Fees to remortgage = £ 195 discharge of mortgage fee
No tie ins etc.

Remortgage
First Direct
Rate = 2.89% (Bank of England base rate + 2.39%) for the full term
Interest calculated daily
Arrangement fee = £ 199
Valuation fee = £ 137
Discharge of mortgage fee = £ 149

Both mortgages allow unlimited overpayments without penalties.

The Motley Fool mortgage calculator indicates that over the approx. 2 years 4 months it will take to repay the mortgage I will:
Pay £3,567.90 interest with NRAM
Pay £2,231.82 with First Direct

Potential benefit of switch = £ 1,336.08
Obviously this unrealistically assumes that Bank of England base rate will remain at 0.5% over that time (if only!).

But from this £ 1,336.08 I need to deduct fees of:
£ 199 (arrangement fee for First Direct)
£ 137 Valuation fee
£ 149 Discharge of mortgage fee for new First Direct mortgage (the NRAM will have to be paid whether I remortgage or not and so has been ignored)
£ 200 (approx) Solicitors conveyancing fees

So, £ 651-08 total saving.

Haven’t remortgaged before – is it worth the hassle for £ 651-08 - I'm tight so think yes :-)

Have I overlooked anything?

Cheers!

Jon.

anh1904

HSBC 2yr discount is 2.79, but only allows 20% overpayments (based on your standard monthly payment) so you could do that if you applied for a mortgage with a short term?

Only a £99 fee from what I can see too.

No advice intended, I am not a mortgage broker, and you should seek an independant "whole of market" one, for which you ought to expect to pay a fee (they are worth it!)

hcb42

why would s/he need a broker, they seem to have a good handle on the situation, and that could erode the saving here? I have never needed to use a broker myself, I understand the market well enough.

OP given you are clearly determined to pay this off quickly, then to me it would be worth the switch - the only real effort will be collating your paperwork etc, which shouldnt be too bad. FD need three months full bank statements as I recall.

dimbo61

One little thing to bear in mind is that once rates do go up the tracker deal from FD will follow straight away while the SVR from NRAM might not!
With the amount you are overpaying each month the effort to change lenders might not be worth it!

STOTTYCAKE_2

Just be careful with you mortgage provider's valuation. We had an estate agent's valuation of £650000 and for quick sale £600000 and Countrywide valued it at £400000 even though in 2002 it was given a survey value of £350000 and house prices even though they have dropped are still 50% above 2002 prices. They valued it with properties that had recently been sold in Council tax Band F and we have always been Band G. Good luck but choose your provider carefully-we were Northern Rock. We had no idea of how strict valuations are now and it might affect the amount you can borrow.