To remorgage or not remorgage??

JimmyTheWig

nudge1988 wrote: »

I paid £63000, If I remorgage I will be looking for 90% of this figure ish therefore ~£56700.

How have you managed to get the amount you need so low?
Does this amount you are looking to borrow include the £1100 early repayment charges? There is no reason why you can't add these on to the new mortgage, but it will have to figure in what you owe and so in the loan-to-value percentage.
If you borrowed 95% (you said you had a small deposit) of £63,000 and are three years into a 35 year mortgage at 6.4% then your current mortgage balance will be around £58,335.
If you then add on the £1,100 that gives £59,435 - only a few hundred quid less than you borrowed in the first place.

So have you been making overpayments (if so, great!)?
Or was it that you were at 90% previously anyway, and the reason for the high rate was due to credit history (if so, is that still a problem?). Or were rates that high 3 years ago anyway?
The amount you are borrowing, and your credit history, are important as they will determine the sorts of rates you will be able to get.

I believe the house is actually worth ~£75000

If this is the case then you will certainly be fine with a 90% deal.


As to whether it is worth remortgaging or not, it's sometimes difficult to compare mortgages as there are so many variables. Doing anything (pretty much) that brings your term down from 32 years remaining to 20 years remaining is bound to be a good thing.
But you don't need to deal in absolutes. It's not a case of remortgage now or keep the current mortgage for the next 32 years.
So it might be easier to think that you could remortgage in 2 years time and not pay any redemption penalties. At that point you could remortgage onto an 18 year term and be in a similar position to if you remortgage onto a 20 year term now.

£1,100 is around 1.9% of your mortgage balance.
So you would only need to cut 1.0% off your interest rate for two years to make that worth doing.
That (a rate of 5.4%) certainly sounds possible. Though remember you may need to pay arrangement fees for the new loan which need to be taken into account.


I suggest you phone your current lender and ask them what deals they can offer you. Let us know what they say and someone can help with the figures if necessary.
Are you with a "known name" bank, or did you use a specialist lender?

nudge1988

kingstreet wrote: »

TBH it's difficult to say. There are some parts of the UK where using the original purchase price might well give an up to date value, but there are others where the valuation might be well out on that basis, either too high or too low.

It might be worth a quick call to your existing lender to see what their desktop valuation might be. If you tell them you're thinking of remortgaging and would consider paying them the penalty and taking a new deal with them instead, they might tell you your loan to value.

A desktop and an inspection can give totally different figures, but TBH at 90% it isn't going to take much for you to be unable to remortgage due to a simple lack of equity.

Likewise, if you apply using 75% and the value is less than you estimate you won't get the product you wanted and may have been better off using a different lender and product in the first place.

It can be rather inaccurate, but what do you get if you use this;-

?

The value of £75000 that I have estimated is due to the house being undervalued at the time of purchase. (I bought it as a repossession from a company who wanted to get rid)

nudge1988

jimmythewig,

I had a 10% deposit, at the time there were few morgages arround for first time buyers with only 10%, also the upfront costs were a deciding factor as to which morgage I could afford, my wages have also increased since then. I am with Natwest currently. I see your point on waiting 2 years then reducing to 18 years if need be, this is something I had not considered.

nudge1988

I think I need to write down and weigh up my options!

JimmyTheWig

My gut instinct is that it is worth remortgaging now.
See what Nat West will offer you over the phone and we can crunch some numbers.
You can then think about going elsewhere for more competitive rates, but the NatWest options will give a good starting point.

Something worth thinking about is how long you plan to be living here. If you are there for the long term then it might be worth getting a 4 or 5 year fix. Rates, to my mind, are low at the moment and so this might be the best of all worlds.
But if you are only there in the short term then a 2 year tie-in might be better.

One last question: Sometimes the early repayment charges depend on how long in to the term you are. Is that the case with yours? In which case, when do they reduce?

nudge1988

It goes down 1% per year from feb. currently the charges would be £1700 and in jan the charges will be 1100. I have been. Assuming i will change morgage next year.

Cheers for your advice i think i will ring natwest and start from there