2yrs into 5yr fix, is it worth renewing with better deal?

chriss1979

We are just about to enter the 3rd year of a 5yr fixed rate mortgate (5.99% Natwest First Time Buyer) and due to the prospect of starting a family in the next year or so are looking at our finances going forward to see if we can get a better deal, and also if it makes sense to redeem and remortgage now while we are both working full time.

We took the £145k mortgage out over 30yrs (paid 10% deposit down) to allow us the flexibility to overpay when we could and reduce it back to the basic amount if we ever needed to, basic monthly payment is £870 and we are at present paying £970 with the odd bit here and there.

Basically it is looking like we could get to 15% equity next year which opens up a whole new set of deals, one of which Ive found is the Nationwide 5yr Fixed @ 4.59%/£99 fee/Free valuation. Taking this out over the same remaining term would save us £1400 per year so £7k over the 5yrs, versus the 3% redemption we would have to pay to get out of our current deal (about £4k).

We are happy to stay where we are for the next 5 years at least, and are looking at this because we dont want to end up in a position where the current deal ends and we cant get a new fixed rate due to my wife not working enough hours for us to meet lending criterias with regards joint income.

Is this something that is worth considering? (or a better deal if there were any around)

Engeroosi

I did this just recently and rather than save money on the monthly payment I have cut 7 years off the mortgage. The monthly payments are less but now on a tracker so payments may go up over time.

It is definatly worth looking into.

Wh05apk

Your assumptions are based on you being at 85% LTV, lenders valuations tend to be harsh, if you paid about £160k for the property, it owuld not surprise me if the new lender came back at around £150-155k, how would that affect your LTV?

It may also be worth speaking to Natwest, they may be able to do an internal rate switch for you based on an indexed valuation, which may be more generous than a proper valuation, also how are you looking to pay the ERC, as if you add it back onto the mortgage, that will put up you LTV again.

mij544

Just do the maths on it, this is the bottom line always, just ensure you take the new rates, surveys, legals, extra interest that you may pay over the term on any fees added to the loan.

Once you get a bottom line figure then the question answers itself.

chriss1979

Thanks for your help and opinions it is helpful speaking to others that have done similar things or can advise on the hurdles!

Wh05apk if the new lenders valuation came back that harsh we'd probably be back in the 10% ballpark again so might end up not being worthwhile, Nationwide HPI does show an increase of 2.76% since we purchased although Im sure that doesnt mean very much especially as the original valuation wasnt with them?

I think I will take your advice and speak to an adviser at Natwest before making any decisions and see if they can do any better deals for us internally, am I right in assuming that not every deal or rate is publicly advertised and there could indeed be something better for us if we spoke to them?

With the redemption penalty that could be something we would have to clear with savings to get the deal, and then use the saved money to rebuild savings over 3 of the 5 years of the new deals term.

DannyboyMidlands

Why another fix? Will you be paying £4k to exit that in another couple of years time?

Just go for a cheap lifetime tracker, unlimited overpayments.

chriss1979

Thanks DannyboyMidlands I can see some rates around are even better than the fixed ones Ive seen!

Our fixed rate ends October 2014 and I think what scares us is being on a tracker or SVR and only myself working due to having started a family, and then rates shooting up with us not being in a position with earnings to meet the earning amount of getting a better/fixed deal again.

Instead of looking to redeem and move the mortgage now, do you think it would make more sense for us to ride our current deal out overpaying when and where we can on top of our regular monthly overpayments, leaving our savings where they are (even building them if possible) and then re-assessing the situation in 2014 a few months before the 5yr fix comes to its end to see what is available?

chriss1979

Wh05apk wrote: »

Your assumptions are based on you being at 85% LTV, lenders valuations tend to be harsh, if you paid about £160k for the property, it owuld not surprise me if the new lender came back at around £150-155k, how would that affect your LTV?

It may also be worth speaking to Natwest, they may be able to do an internal rate switch for you based on an indexed valuation, which may be more generous than a proper valuation, also how are you looking to pay the ERC, as if you add it back onto the mortgage, that will put up you LTV again.

Wh05apk is an internal rate switch something that would be done at their discretion after speaking with them? Also is that something that would mean redeeming to move onto?

somethingcorporate

You would need to redeem (pay ERC) to move internal rates. Absolutely nothing in it for the lender otherwise!