Mortgage Confusion

ste_86

Hi All

havent posted for a while due to a stressful year, anyway my predicament!

Took out a mortgage 18 months ago with Halifax of 92,450 we pay 560pm fixed at 6.04% this is for 3 years, now one of my close friends has switched now to a fixed for 3 maybe 5 years with santander his repayments have dropped dramatically and they added the cancellation fee onto the mortgage saving him around 13,000 in the long run, is this sensible as i have had a lot of problems with halifax, i have read that Martin said now is the time to switch due to low rates im young and confused by money :-( my naivity is my worst enemy!

Thanks in advance
Ste

Thrugelmir

Firstly take a look at your mortgage paperwork. To exit the product you have you'll have to pay an early repayment charge (ERC). This is normally a % of the outstanding balance. So will impact the viability of switching.

How much is it ?

ste_86

before 30/06/2011 its - 2,803
before 30/06/2013 its - 1,868

had no end of trouble with halifax and recently switched current accounts in to santander, my fiance is going back to uni is Sept so want to get all our outgoings down, despite hoping to invest in a new car ha

thanks

Trentenders

ste_86 wrote: »

had no end of trouble with halifax and recently switched current accounts in to santander
thanks

You've moved to possibly the worst regarded bank for customer service

kingstreet

At the rate you mention, I suspect you have a 90% mortgage and your chances of remortgaging elsewhere are pretty slim.

Can you confirm the total you'll need, including the mortgage account fee and penalty (see section 10 of KFI or page 8 of mortgage offer) and the location, purchase price and date you purchased the property.

ste_86

Hi Kingstreet
Im not to sure onwhat you are asking me we already have the mortgage an have done for 18months we havent looked elsewhere yet but assume the fees will be similar elsewhere, very confused still sorry

spadoosh

Your mortgage is similar to mine by the looks of it, also with halifax.

Theres a good possibility your friend is either on a tracker mortgage or variable rate mortgage which will be paying substantially less interest about 2/3%. Alternately they could have reduced the term of the mortgage increasing payments now and reducing the overall cost in the long run.

The good thing about your mortgage is you know exactly how much you have to pay each month and that will not change (untill the 3 years is up and your put on the variable rate in which its likely, at the moment, to reduce your repayments), by the sounds of it your friends could increase should the base rate increase. If you did go for 90% LTV not every bank will deal with you and you are more likely to pay a higher interest rate as your investing less capital.

kingstreet

Ok.

When you bought the property, you went along to Halifax (for example) and said to them "I want to buy a property for £100,000. We have savings of £10,000, please lend us £90,000."

That's a 90% mortgage. You put down 10%, they lent the rest.

Now, you want to go along to another lender for a remortgage. Your question will be "I want to remortgage my current property. It is worth £100,000, I have £10,000 equity and I need to borrow £90,000 to repay my existing mortgage."

Once again that's a 90% mortgage.

What I need you to do is find out how much you will need to repay, THIS figure, by looking at the key facts illustration or mortgage offer for your current mortgage.

Then I need you to get an idea of the property valuation now, if you're not sure use the price you paid when you bought itTHIS figure.

When we know the property value and the amount you need to borrow to repay Halifax, then we can tell you if your remortgage is possible.

ste_86

sorry
get it a bit better now guys
we bought the property for 109950
borrowed 92450 and have been in the house for 18 months

spadoosh, just spoke with my friend and he has just knocked 2% off the interest rate which is fixed, i dont mind waiting until next year but just want to save what i can
Thanks again guys

spadoosh

People arent always too honest about thing like this. So hes on a fixed deal at 4.04%. On that basis then i would assume he has a smaller LTV than you, also were unsure of what he was paying before, it mightve saved hime 13000 but he could have been paying over the odds beforehand.

Your mortgage rate doesnt look unusual or high for a fixed deal so your not getting 'stung' or anything along those lines. There might be options to get it cheaper (ie reduce the %) but doing this normally involves putting more money down to reduce the amount your borrowing overall. I wouldt look at the cost of the mortgage overall as idelaly your supposed to change more or less everytime your deal is up (3 years) so its likely youll never pay what it says you will but look at the cost of it over the deal. Essentially everytime you remortgage you should be paying less and less but you need to work out wether it is cost effective to take the hit on cancelling your currwnt mortgage to get a new one or sticking with it untill your allowed to get a new one, other factors come inlike how confident you are in interest rate rises etc etc but bear in mind mortgage rates will probably never be cheaper than they are now (bold statement but probably true)

ste_86

thank you for your help :-) i can be a little happier now!