Good LTV, stuck on high fix/redemption - options please?

Lord_Isleworth

I am on a Santander fix 5.69 (5 year fix) taken out late 2007
I have regretted the five year fix every since but we were forced to accept the 5 years when Santander agreed loan. I suspect that was because of dependents and one income but we have had mortgages for 10 yrs and have rock solid credit history. No debts etc...They wouldn't allow the two year fix at the time.

We originally moved just before the property crash late 2007 to a 3 bed house in West London. At the time we fixed with Santander (Sept 2007) for 5 years on 5.69%. We have two small Children (6 & 3) and we wanted stability and sought advice from independent mortgage advisers at the time. Obviously the rate then went to rock bottom pretty soon after us fixing late 2007.
We struggled a long for 2 years and then decided enough was enough and managed to sell our house at a profit and relocate to Sussex.
Ok some fact and figures:
Our Sussex house was bought for 309k
We pay £825 a month interest only.
We have overpayed 40k in two years (maximum permitted) to get our mortgage to 174k. We plan to overpay again 17k in Jan 2012 so our mortgage Jan 2012 will be 157k. After overpayment will have furthwr 20k of savings.
The mortgage expires May 2013.
The issue we face relates to a 7k redemption that will have to be paid
I earn 47k and I know paying a 7k redemption is a lot but are there offsets/flexible mortgages will no tie ins that would work out better for us?
I suspect the gov decision to release another 75 billion will mean interest rates are low for at least two years and I hate Santander and would like to move and never come back to them.
We would love to pay less monthly because our general outgoings have all gone up in the last year due to cost of living.
So what options are available? I saw a 7 yr fix with cheslea that looked good? Should I think 2 years deals or longer?
Any help appreciated?

MFSaver

Long term deals are good if you want security and do not want to pay remortgage fees after a couple of years.

Chelsea Building Society has a 3.69% fixed for 7 years (70% LTV).
YBS has a 3.39% fixed and 3.49% offset for 5 years (75% LTV). They also have a tracked to fixed deal; 2.29% + BoE rate for 2 years and 3.39% fixed for 3 years (75% LTV).

Considering that your LTV should be very low, you might want to look at some lifetime trackers whcih have no early repayment charge should you want to transfer away at a later stage.

Basically you have to check whether you will at least make back the 7k redemption fee (and other fees you have to incur) from the date of your potential new mortgage to May 2013. Assuming you manage to remortgage starting next month, it will have to be a reduction of early 400 pounds per month. I suspect that you might just break even if you take the YBS tracker to fixed. You do get the security of a long term fix at a good rate though.

In short, do the maths if the fees is worth making sure that you secure a long term fix now, even if you have to pay a decent sum on fees now, or wait till May 2013 and hope rates do not go up.

I think there is little benefit in you remortgaging to a short-term deal because of the high redemption fee and the prospect of paying more fees again in 2-3 years.

kingstreet

Only you can decide if your priority is to fix again, or to take a variable option instead. How would you feel if interest rates start to rise and you find your payments going up past the point you could have fixed at?

Would the mortgage still feel affordable to you? If you're the kind of person who will worry about it incessantly, take the fix. I pretty much agree with you about short-term rates, so a combination deal like the Yorkshire tracker/fix MFS mentions has possibilities.

As far as the £7k ERP is concerned, you're going to have to look at the total cost of the deals you find most appealing, add £7k to that and then compare them with staying as you are. Chances are, if you go for something relatively short, you won't cover the £7k and it won't be worthwhile moving. A longer term product would give you a much better chance of covering this cost, but that has to be the deal you would have gone for. Don't pick a deal just because it will cover the £7k. Make sure it's right for you first.

Thrugelmir

Lord_Isleworth wrote: »

We would love to pay less monthly because our general outgoings have all gone up in the last year due to cost of living.

Market has moved on. You will more than likely have to switch to a repayment mortgage or have a suitable repayment vehicle in place.

So in cash terms your monthly outgoings may not change significantly without amending the mortgage term.

dimbo61

well done on the overpayments so far !
As Thrugelmir has pointed out if you move lender you may also have to chenge to repayment
What does the mortgage revert to in May 2013 ? which is 18 months off!
I would overpay every penny you can afford and save as much as you can and stick with your current lender until may 2013 and then you can pay off as much as you like
Only my views GOOD LUCK
I love offset mortgages and YBS have some excellent deals