Repaying lump sum when remortgaging with existing lender

Bargain_Rzl

Please pardon my ignorance, this is my first mortgage.

I am currently a few months into a 25yr Nationwide mortgage on a 2yr fixed rate (repayment mortgage). I am paying the standard monthly repayment and putting as much spare cash as possible into an ISA and a Regular Saver, both of which are currently outperforming the interest rate on the mortgage.

Standard Nationwide rules apply: during the fix I can overpay up to £500pcm. Once the fix is ended I can overpay unlimited amounts. If I remortgage with Nationwide at the end of the fix, I will get a discount on the arrangement fee for the new product, and won't be liable for an early repayment fee as I would be if I switched lenders.

If my circumstances remain as they are, I should have several thousand pounds available in my savings by the time the fix comes to an end, and I am planning to make a lump sum payment at this point.

SO what I am trying to find out is...

If my fixed rate ends on 30th November 2008 (which it does) and I have arranged in advance of this to stay with Nationwide on a new fixed rate, what will I do with my £6k-£8k? Presumably the first time I will have the opportunity to pay this lump sum without penalty will be 1st December 2008, which will also be the day I would want the new mortgage to begin. How do I juggle making sure the lump sum is paid in on the right day, without incurring a penalty for paying it early, and that the new mortgage is for the right amount?

Of course what I really want to happen is to continue to be able to save or invest at a rate which outperforms my future mortgage rate, but let's assume that isn't possible. Can somebody please explain this to me in words of one syllable as my brain hurts!

wardlaw

Simply pay your lump sum on 1st December and arrange for yor new re-mortgage to start on 2nd December

John

Bargain_Rzl

Ah thanks, I knew there had to be an easy answer!

herbiesjp

If I'm not mistaken, I believe Nationwide allow you to make a capital lump sum in the last month of your current deal

You may just want to ring them up and confirm

Bargain_Rzl

Thanks Herbie - I'll do that at some point (I've got plenty of time after all)

So - sorry, another dumb question coming up - when I apply for the new deal, the BS doesn't need to know at that point exactly what the outstanding balance will be at the point at which it switches over - just that whatever remains outstanding will be switched to the new rate?

What if (hypothetically) there has been a slump in the market before then, and the lump sum I'll be paying off is going to make the difference between negative/minimal equity, and a reasonable level of equity which would qualify me for the next deal? (It's only a small mortgage, being Shared Ownership, so this could happen).

silvercar

Bargain_Rzl wrote: »

What if (hypothetically) there has been a slump in the market before then, and the lump sum I'll be paying off is going to make the difference between negative/minimal equity, and a reasonable level of equity which would qualify me for the next deal? (It's only a small mortgage, being Shared Ownership, so this could happen).

If you are remortgaging for the same/ smaller amount than before, the lender will have no reason to revalue the property. If you were going for a new deal that relied on a lower loan-to-value than you had previously they may ask you the loan-to-value, whether they would insist on a revaluation I don't know.