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Is it worth changing my mortgage

There are a few below 3% five year fixed deals about at the moment.

I foolishly took out a 5.35% 10yr fixed with nationwide in 2006, as I thought at the time interst rates were at an all time low. I remember the % being in the teens not that long ago relateively speaking.

I have had my flat valued at 70,000
I owe approx £36k on the mortgage, so about 34k equity.
I fall into the various stipulations regarding deposit amount etc.

I am on incapacity benefit and DLA and I receive a pension of £460 a month after being retired from my long term office career in the civil service. Although my doctor believes I am obviouly unfit for work, under these new stricter systems, there is a realistic chance that Atos, the DWP assessors, may find me fit for work.
If this is the case, I may end up with only my pension to live on.
I will no longer be able to afford to pay the mortgage which is 311.20 a month.

I am looking at changing my mortgage to try to cut monthly outgoings. I have also lowered other outgoings like phone, web, no tv, food etc etc.

I realise that there will be an early repayment fee and that there will also be an arrangement fee, valuation and legal costs.

I cannot decide if it is worth doing, and would love a bit of help in deciding please.

I will be happy to let you have any more information.

Thanks

Comments

  • dimbo61
    dimbo61 Posts: 13,727 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    The fees for 2 of the 5 year deals at 2.99% is £1499 and with you only owing £36K it would not be worth moving lenders with all the other costs.
    Not sure if other lenders would even lend to you as you are not working
  • bundance
    bundance Posts: 1,114 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    dimbo61 wrote: »
    The fees for 2 of the 5 year deals at 2.99% is £1499 and with you only owing £36K it would not be worth moving lenders with all the other costs.
    Not sure if other lenders would even lend to you as you are not working
    Thank you for this needed feedback and reasons not to switch mortgages.

    I was unsure if arrangement fees can be added onto the mortage and early redemption fees taken out of the equity?

    Would this still be a no goer?

    Thanks
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    edited 7 August 2012 at 7:38AM
    £36k saving 2.35% around £70pm 5 years £4230

    real numbers
    £36k @ 5.35% paying £311pm is around 164m full term in 5 years owe £25670

    £36k @ 2.99% over 164 months is £269 so looks like a saving

    Add fees say £3k and break even by 5years needs a payment of £304 so not much saving, depends on total cost to change.


    Remember at the end of the current fix your Nationwide rate is probaby BMR so base+2% currently 2.5%.

    Any new deal will not be so good.
  • Wh05apk
    Wh05apk Posts: 2,938 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    For a small mortgage like this, it would almost certainly not ve worth paying any fees to set up, so rates would be slightly higher, with 4 years to run though it may be worth biting the bullet and paying the penalty, your problem will be income though, in that given your current income, I think you would struggle to find a lender.

    Have you checked to ensure you are claiming all the benefits you are entitled to?
    I am a mortgage adviser.
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • bundance
    bundance Posts: 1,114 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    Thank you Getmoreforless and wh05apk

    I've checked my benefits and this is all I am entitled to.

    I really apprciate you setting all the figures out for me, Getmoreforless, but I regret I have trouble understanding them.
    Side effects of my medication cause confusion, the doc knows.

    At the moment my income is satisfactory, it will only go down when I cease to be entitled to the benefits I am on.

    I thought of changing mortgages to allow myself more income until I have to sell my flat.

    Can I just clarify please? In conclusion, is it not worth me doing it, as I wont get a lender who will lend while on benefits?

    Thanks
  • Jimbo1976
    Jimbo1976 Posts: 498 Forumite
    Bundance

    Can you tell us what the precise early repayment charge is? I suspect it is 2-3%. From memory it decreases over time.

    It is worth having a chat with Nationwide to see what rates you could choose if you left your fixed rate. You should be able to add your early repayment charge to your loan rather than paying for it now if thats difficult.

    As getmore4less and Wh05apk have suggested with the size of your mortgage choosing a rate with a £1,500 fee makes no sense. You should look for rates with no set up fees
  • bundance
    bundance Posts: 1,114 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    Jimbo1976 wrote: »
    Bundance

    Can you tell us what the precise early repayment charge is? I suspect it is 2-3%. From memory it decreases over time.

    It is worth having a chat with Nationwide to see what rates you could choose if you left your fixed rate. You should be able to add your early repayment charge to your loan rather than paying for it now if thats difficult.

    As getmore4less and Wh05apk have suggested with the size of your mortgage choosing a rate with a £1,500 fee makes no sense. You should look for rates with no set up fees
    Hi Jimbo and thanks for your post.
    As far as I remember, the redemption fee would be about £1500

    It would not be worth it to change morrgage if I had to shell out the fee there and then, but I wondered if that fee could be added to my mortgaqe.

    As for nationwide, they will not let me come out of my fixed term until it is up, not even for one of their own products.
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    There's two different questions, OP.

    The common question, and the question most people are answering, is "Over the long term, is it worth ditching my fix?". In your case, with a low mortgage balance, the answer is probably no.

    But I think your question is "In the short term, is it worth ditching my fix?".
    I think that you are saying that once you sell your flat, it doesn't matter to you that much what your mortgage balance is because you will be able to cover it from the selling price.

    If you can get your interest rate down by 2%, say, that will save you around £720 over the next year.
    If it costs you, say, £3000 to do that then this would be a bad move in the long term. Which is what people are telling you.
    But if you are saying that you can't (or won't be able to) afford your current mortgage then reducing your payments by £60 a month might be the difference between coping for the next year and not coping for the next year.
    Also, if you are going to sell then you will be paying the redemption penalties anyway.

    Whether it's possible, I don't know.
    First port of call would be your current mortgage company, I would say.
    Contact them and get them to give you some figures. You need to ensure that whatever deal they move you on to doesn't have any redemption penalties if you pay off the mortgage in full at the time that you want to do so.
    Then come back here and tell us what they've told you.
    And spell out to us what your plan is over the coming months, and how much money you need to do it.

    It may be that by cutting down spending elsewhere (again, people here can help you) you can cope with your current mortgage.
  • bundance
    bundance Posts: 1,114 Forumite
    Part of the Furniture 500 Posts Combo Breaker
    There's two different questions, OP.

    The common question, and the question most people are answering, is "Over the long term, is it worth ditching my fix?". In your case, with a low mortgage balance, the answer is probably no.

    But I think your question is "In the short term, is it worth ditching my fix?".
    I think that you are saying that once you sell your flat, it doesn't matter to you that much what your mortgage balance is because you will be able to cover it from the selling price.

    If you can get your interest rate down by 2%, say, that will save you around £720 over the next year.
    If it costs you, say, £3000 to do that then this would be a bad move in the long term. Which is what people are telling you.
    But if you are saying that you can't (or won't be able to) afford your current mortgage then reducing your payments by £60 a month might be the difference between coping for the next year and not coping for the next year.
    Also, if you are going to sell then you will be paying the redemption penalties anyway.

    Whether it's possible, I don't know.
    First port of call would be your current mortgage company, I would say.
    Contact them and get them to give you some figures. You need to ensure that whatever deal they move you on to doesn't have any redemption penalties if you pay off the mortgage in full at the time that you want to do so.
    Then come back here and tell us what they've told you.
    And spell out to us what your plan is over the coming months, and how much money you need to do it.

    It may be that by cutting down spending elsewhere (again, people here can help you) you can cope with your current mortgage.
    Hi Jimmy

    Thanks for that great post :)
    I will contact nationwide and ask them a few questions tonight when the 0845 nationwide number is free.

    Thanks again
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