Ditch the fix or not?

oasisfeverish

Hi all,

Just asking for input to current situation.

Currently have circa. £54k at 5.99% fixed until Sept 2017. Property value range £175k - 200k.

Am looking at buying property for £230k, therefore increasing the mortgage.

Want to have a 50% LTV so new total mortgage amount would be £115k, and deposit will be £115k.

Am undecided whether to keep existing fix rate and save paying out the 5% ERC, and then take out a new mortgage for the remainder at a lower tracker rate. Or ditch the fix and take a new mortgage for the full £115k on the lower tracker currently at 2.47% thus paying out the ERC.

Fixed rate allows 5% per annum overpayments.
Tracker rate allows 10% per annum overpayments.
However no guarantee I would max these out each year, or even reach 5%.

On a slightly separate note, am bit worried on even getting the new mortgage with all the tightening of lenders. I have a 50% deposit, our income is 4.56 x multiple. Affordability is fine as have worked out that by paying off a car loan from the equity the saving per month covers the new additional mortgage payment. So effectively the outgoing amount will be the same as the mortgage and loan total is now.

Would the LTV of 50% and affordability give us a greater chance of agreement, although the multiples are high?

trulysaintly

oasisfeverish wrote: »

Hi all,

Just asking for input to current situation.

Currently have circa. £54k at 5.99% fixed until Sept 2017. Property value range £175k - 200k.

Am looking at buying property for £230k, therefore increasing the mortgage.

Want to have a 50% LTV so new total mortgage amount would be £115k, and deposit will be £115k.

Am undecided whether to keep existing fix rate and save paying out the 5% ERC, and then take out a new mortgage for the remainder at a lower tracker rate. Or ditch the fix and take a new mortgage for the full £115k on the lower tracker currently at 2.47% thus paying out the ERC.

Fixed rate allows 5% per annum overpayments.
Tracker rate allows 10% per annum overpayments.
However no guarantee I would max these out each year, or even reach 5%.

On a slightly separate note, am bit worried on even getting the new mortgage with all the tightening of lenders. I have a 50% deposit, our income is 4.56 x multiple. Affordability is fine as have worked out that by paying off a car loan from the equity the saving per month covers the new additional mortgage payment. So effectively the outgoing amount will be the same as the mortgage and loan total is now.

Would the LTV of 50% and affordability give us a greater chance of agreement, although the multiples are high?

If you're after a short answer...then yes the 50% LTV will go in your favour!

The mortgage market isn't as bad as many paint it - there are lots of lenders now chasing little amounts of business so don't be put off.

One lender told me recently that it wasn't funding holding them back but lack of interest from the public.

To make an overall comparison to which option being best for you, an independent adviser would need full details of your circumstances - as regulated we can't make a judgment just on a few figures I'm afraid.

getmore4less

Check the best deal your current lender will give you porting the existing loan and their best option not porting.

These will be the base lines for looking elsewhere.

Its not too hard to do the comparisons after that.

dimbo61

The best deals come when you have a LTV below 60% now you have a 50% with savings and equity so why not borrow a little extra at the lower rate on the tracker and overpay the 5% allowed on the fix for the next 6 years if you decide to port the existing mortgage

oasisfeverish

Thanks for all your input.

I have used Martin's Ditch the fix calculator based on £54k o/s, 5.99% with 75 months remaining in fixed term.

The results say that the new mortgage would have to be consistently under 4.94%.

At present I would be looking at a Tracker Loyalty which is 1.89% + BBBR until August 2013, then 1.97% + BBMR thereafter. So if I have worked it out correctly and BBMR keeps in line with the BofE base rate. The rate would need to reach 3% before I am technicially worse off than the fixed rate.

I guess the question is are rates going to reach 3% or higher within the 6 years I still have remaining?

I also like the idea of taking out a larger loan on the lower tracker rate and using my equity kept back to overpay on the 5.99 at the max 5% per annum. Although this may not be a solution as the multiples will increase and then knock on the affordability ratio.

somethingcorporate

I'd suggest you stick with the fix, you were happy with the certainty before and should probably keep that.

Gambling on rates for 2-3 years is hard enough but 6 years the unknowns are simply unquantifiable.

dimbo61

from your own figures have you looked at the YBS 5 year fix at 3.99% for long term security fee £995