Large cash inflow expected - remortgage question. FTB

sameerbuch

Hi,

I am a first time buyer looking to get a mortgage.

I can get a 90% LTV mortgage with a rate of 5.49% for two years.

By the end of these two years, I am expecting a large cash flow of say 100k.

Is it possible to:

1 - Take out the mortgage described above today, for two years
2 - at the end of the two years, a spreadsheet i have tells me the outstanding balance on the original 350k loan will be 336k
3 - Take a NEW mortgage out, ditch the 2 year one as the two years are over, and say right i want a mortage of 336k LESS the 100k i have received so i want to remortgage/refinance 226k mortgage.

Is this possible? Are there extra fees for this? Is it classed as an "overpayment"?

If its possible, then why don't more people do this?

kingstreet

If you take a mortgage product with no early repayment penalties, or you see out these penalties as they last as long as say a fixed rate, you can make whatever overpayments you choose.

If you then wish to ask the current lender for a new deal, or wish to remortgage to a new lender for a new deal on the lower amount, that's entirely up to you.

More people don't have to plan for having a hundred grand two years after buying their first home?

ACG

Yes you can - depending on the mortgage but so long as you choose a 2 year deal it should be ok.

There will more than likely be fees applicable for taking out a new mortgage but it wont be any more than usual just because you are remortgaging and paying off a large chunk.

sameerbuch

kingstreet wrote: »

If you take a mortgage product with no early repayment penalties, or you see out these penalties as they last as long as say a fixed rate, you can make whatever overpayments you choose.

If you then wish to ask the current lender for a new deal, or wish to remortgage to a new lender for a new deal on the lower amount, that's entirely up to you.

More people don't have to plan for having a hundred grand two years after buying their first home?

True, but if I get a new mortgage then it will be a lower rate as assuming my house is still worth the same as when I bought it, i will have a lower LTV hence the new rate will be less than 5.49% - am I right?

kingstreet

sameerbuch wrote: »

True, but if I get a new mortgage then it will be a lower rate as assuming my house is still worth the same as when I bought it, i will have a lower LTV hence the new rate will be less than 5.49% - am I right?

Yes. Of course. What did I say which would lead you to think I was suggesting anything different? The 5.49% is either expired, or you can leave it penalty-free either way...

When you pay off the lump sum, you'll negotiate a new deal with your current lender, or a new lender, based on on the loan to value at the time of negotiation.

sameerbuch

kingstreet wrote: »

Yes. Of course. What did I say which would lead you to think I was suggesting anything different? The 5.49% is either expired, or you can leave it penalty-free either way...

When you pay off the lump sum, you'll negotiate a new deal with your current lender, or a new lender, based on on the loan to value at the time of negotiation.

Was just confused! Ok thanks for the help.

ACG

Thats presuming you have brought it down under the next threshold for a better LTV. In your case you will have done, but not everyone will have done.

sameerbuch

Are there many mortgages with no early repayment costs? I assume not really as I haven't seen many. And would you end up paying a higher rate to avoid ERC?

kingstreet

If you want a fix, you're going to be stuck with ERPs, so that means seeing out the rate and penalties before you can make the overpayment.

Tracker and discount products sometimes have no penalties, so you could make the overpayment on them any time.

Pick the best thing for you now. At worst, you might have to wait a month or two to make your overpayment. Watch the follow-on rate which comes when the fix, tracker or discount ends. If you get a good one, you might not even have to change products after you make the overpayment.

sameerbuch

Thanks. Very very helpful.