remortgaging help needed

loveGSDs

Hi

Im struggling to get my head round some points about remortgaging, and really dont know what to do for the best....can anyone offer some advice?? my story....

current mortgage - £87,000,
rough value of house at present - £98,000

currently on SVR of 5.2% paying £567 a month (for almost 2 yrs now)

For the past yr we have been deperately saving for a deposit to move to somewhere bigger, and hope to have enough savings/equity to do so next year - (have £10k saved so far)

Worried about interest rates rising so we have been looking into remortgaging to get a fixed rate - looks like we can do this and monthly payments will be slightly less a month...should we do this? could we still move next year if we remortgaged to a fixed rate?

also, i cant get my head around what happens to the current equity if we remortgage? does it go into reducing the overall mortgage - i.e currently £87k mortgage but after remortgage do we owe £75k on mortgage or is it still £87k? - sorry hope that makes sense

thanks for reading

xx

robbiecaratiger

To be honest I'd do what I did earlier today.

Took the advice as seen by Martin Lewis on this site & called London & Country Mortgages on 0800 953 0598 (freephone number) with your enquiry.

All advice they give to you is entirely FREE and WITHOUT obligation.

They conduct all the searches for you & if they find you a deal you're happy with then they even manage the application for you.

I've just saved £180 per month on what I thought was a good deal

Best of luck

kingstreet

If you remortgage to a fixed rate now, when you come to move house you'll have to stay with that lender and hope you can "port" the rate to a new mortgage with them, otherwise you might have a rather large penalty to pay.

Why are you keeping money in a savings account if you could effectively get over 5% on it by paying it off the mortgage? By doing that, you can either pay less for your mortgage each month, or keep paying what you're paying now and overpay the mortgage, reducing what you owe and increasing your equity and therefore the deposit for your next home.

When you sell one home and buy another, you don't need a cash deposit. The equity in your current home becomes your deposit.

For example, if your current home is worth £98k, you could reduce your mortgage to £77k, giving you £21k equity as the deposit for your next home.

If you do remortgage, the equity remains where it is - your stake in your home. You'd raise a new mortgage of £87k to repay the old one, on a property value of £98k. Looking at the figures, remortgaging to a new lender may be difficult as you don't have that much equity. Transferring to a new product with your current lender may be a better option.

I think you should seriously consider the lump sum payment to reduce your mortgage and continue to overpay as I mentioned earlier. Look for new mortgage deals when you move.

loveGSDs

kingstreet wrote: »

If you remortgage to a fixed rate now, when you come to move house you'll have to stay with that lender and hope you can "port" the rate to a new mortgage with them, otherwise you might have a rather large penalty to pay.

Why are you keeping money in a savings account if you could effectively get over 5% on it by paying it off the mortgage? By doing that, you can either pay less for your mortgage each month, or keep paying what you're paying now and overpay the mortgage, reducing what you owe and increasing your equity and therefore the deposit for your next home.

When you sell one home and buy another, you don't need a cash deposit. The equity in your current home becomes your deposit.

For example, if your current home is worth £98k, you could reduce your mortgage to £77k, giving you £21k equity as the deposit for your next home.

If you do remortgage, the equity remains where it is - your stake in your home. You'd raise a new mortgage of £87k to repay the old one, on a property value of £98k. Looking at the figures, remortgaging to a new lender may be difficult as you don't have that much equity. Transferring to a new product with your current lender may be a better option.

I think you should seriously consider the lump sum payment to reduce your mortgage and continue to overpay as I mentioned earlier. Look for new mortgage deals when you move.

using the savings to pay off some of the mortgage is something i have considered, however i decided not to because im worried about property prices falling even more and therefore losing more money (iv already made a £15k loss due to price falls already) i know i would make a better gain in paying less in interst in mortgage compared to what im earning in interest on savings but i really want to move and dont want to lose the ability to if house prices fall more..... if only my crystal ball was working, then i could see what house prices will be like in 2012

ChopperST

I'm in almost the exact same boat as you with almost identical figures (Your mortgage isnt the Halifax is it?)

Have you looked at what your mortage will drop to when your fixed rate ends? I know you are looking at the security of knowing what you'll pay per month but its likely that when your deal does end you will go onto the mortgage lenders SVR which will be something like the BOE base rate + 1 or 2% (obviously check your product to be sure). That gives you a cheaper payment each month but if you continue to pay the same as you are now you will be overpaying and therefore decreasing your LTV and increasing your deposit for your next place. Plus if you find somewhere you want to move to you arent tied into a mortage product and are free to move and look at the whole of the market for the best deal then rather than porting.

Obviously if rates go up you can then take a new deal out and fix but they'll have to go a long way from a base rate of 0.5 to outmuster your current 5.2% In my opinion I dont think the base rate will rise significantly over the next two years a least and when it does it will be in 0.25 - 0.5% increases as opposed to a big jump giving you plenty of time to fix if you are worried about affordability.

Good luck whatever you choose.

edit - Sorry you say you are currently on an SVR of 5.2% is that really your mortgage providers SVR or your rate for a particular term?

loveGSDs

thanks chopper - im not with halifax, its dunfermline BS.

as far as i know im on their SVR- which has been 5.2% for past 2 yrs (i was on fixed before that, rate was 6.1%)

im so confused - ahhhh! lol

i wanted to go with fixed again for security, but really dont want to be stuck in this house any longer than i need to. iv already been here way longer than i wanted to :-< (damn you 100% mortgages and price falls on houses! )

ideally id remortgage with nationwide - they seem to offer good deals for current lenders, if i go with them i could pay off a lump sum of mortgage, but still keep some savings for emergencies and deposit

i think i just need someone to tell me what to do :rotfl:

ChopperST

Quick search brings up HSBC fee free tracker 25 years @ 4.69% with no tie in and no set up fees for £493 p/m. You'd also be able to fix if you want at any point in the term (or obviously move house).

loveGSDs

ChopperST wrote: »

Quick search brings up HSBC fee free tracker 25 years @ 4.69% with no tie in and no set up fees for £493 p/m. You'd also be able to fix if you want at any point in the term (or obviously move house).

is that based on 87k mortgage - ie not putting any of the savings in?

handytips

The trouble that you have is your LTV (loan to value) which is the difference to what you owe (£87k) and the value of your property (£98k) which equates to you are borrowing currently 88% of the current property value. If you fix now that is fair enough and if the product is portable you will be able to take the mortgage with you to a new property, however if you need less money they will charge you a penalty for that. The amount of products that are available to you is very limited due to your LTV should you get it below 85% LTV there will be many more products available to yourself.
I would imagine you will struggle to get anything under 5%. As you have indicated that you are with Dunfermline, this may suggest that you may have or have had credit problems in the past, if this is the case then there are no products available to yourself at the moment. You may want to employ the services of a Mortgage Broker who is Whole of Market, they will be able to determine what is available to yourself. If you Google 'Mortgage advisor ...................' for example 'Mortgage advisor Blackwood' you will come upon a broker close to you. As you appear to be a person who needs good independant Mortgage advice. Good Luck

loveGSDs

i, or my partner have never had credit problems. both credit scores are over 950

we went with dunfermline as it was offering the best deal for us at the time (2007)

we can get our LTV down to 85% by adding some of our savings - which i think we will prob end up doing.

handytips

should you be able to do this then there are quite a number of good fixed rates available to you. sorry for asking about credit, but dunfermline did specialise in the sub prime arena at one time.
will send you a private message.