Question about coming to the end of of first 2 year mortgage deal

Kara_P

Hi, my partner and I bought our first house last year and the mortgage deal (2 year tracker at 5.9%) comes to an end mid way through next year. We wondered at this point what we do? If we switch onto the variable rate do we need to do anything first e.g have the house valued? If we go onto a fixed rate do we have to pay another arrangement fee?

Thanks for any help and sorry if I have left any info needed to answer the question out.

Farmerbob

Normally if you stay with your current lender then you do not need to get a re-valuation done, if you look at other lenders some will pay your valuation.

When the deal ends you will go on to the Standard Variable Rate (SVR) you need to take a few thing in to consideration, is the SVR rate more or less than what you currently have or are their new deals better or worse than your current rate/SVR rate.

You may have to pay an arrangement or product fee if you do re-mortgage however some lenders have fee free mortgages or for customers of their banking facilities.

Who's your current lender and what is the (SVR) rate you will go on to?

Kara_P

Thank for the speedy reply. We are currently with Lloyds and having a quick look at their website the SVR is 2.5% (but states only if we warranted our mortgage before the 1st June which we didnt) so I will keep looking at we will pay. Wow 2.5% seems like nothing in comparison to our current rate!!

Kara_P

It is 3.99% for us.... That is quite a difference! Shame we didn't buy our house 2 months quicker!

Farmerbob

So realistically you would need interest rates to go up by around 1.91% before you would be paying at the same level now once you are on the SVR.

You have the option to do nothing and just leave it to go on SVR as most of the folk will say rates will stay relatively low for the foreseeable future when they start going up again the you can look for a new product then or unless the deals they offer you when your current deal expires at the time are better or close to the SVR.

Its a good chance to make some headway and reduce the balance by using the savings in the payments to clear some of the capital and lower your loan to value and get access to better deals. Do you know your current LTV?

Kara_P

We only put down a 10% deposit so I would say it will be 88% LTV when we come to remortgage (we added a £995 product fee to the mortgage).

Farmerbob

You might struggle finding a better deal at that LTV, but you never know see nearer the time. But I would definitely look at starting overpaying now even if your just rounding up your payments you may find that 85% LTV may have better deals.

Im currently on 82% LTV so working hard to get it below 80% so i can pay less interest than my current SVR rate should hopefully get there March/April fingers crossed!

Kara_P

We are only allowed to overpay 10% which we have done one out of the two years (wedding next year). Oh well at least we should hopefully so a decrease in our monthly payments (and then we can overpay without thinking about it). Good luck to you and thanks for the helpl.

Yorkie1

Once you're out of the fixed period, I think you'll find that there are no % limits on overpayments - best to double check the position though.

dimbo61

If you have no other expensive debt ( wedding) then overpay the mortgage debt by whatever you can afford each month.
This will save you £££££ thousands over the term of your mortgage
GOOD LUCK

Kara_P

We intend to overpay every year except this one. We don't intend being in the house for too long (about 5 years) as it is just a starter home but hopefully by that time with overpayments we will have paid off 10-15% of the capital.