What should I do?

dannymccann

I was a FTB and took a new build with a 40 year product @5.6%.

Deal ended in March and has gone on to SVR now (I think its BR + 2.5%, need to check though), so better value, but still based on 37 years repayment. Currently overpay by £50 a month, so not a lot but it's something!

My question is, should I be looking to move on to another product with fewer years or should I stay on my SVR? My LTV is around 75%. Am I paying a lot more interest on the mortgage debt of £100,000 compared to a 25 year?

kingstreet

You can overpay each month and this will reduce the term of your mortgage. As this is voluntary you can alter the amount of payments and not overpay at all in a particular month.

If you move to another lender, reducing the term, you are stuck with those higher contractual monthly payments whether you like it or not.

Obviously, you need to keep an eye on the rate you are paying in comparison with other offers available to you.

latecomer

Why not keep paying the same amount each month as you were previously - this will not only reduce the capital outstanding and hence interest paid in the long term but also help get you onto a lower LTV for when you do decide to take another product.

ACG

Once on the SVR your outside of a deal so you will most likely be able to overpay as much as you like (double check your paperwork though).

That means you can overpay by keeping your payments the same and therefore reducing the term.

If your 3 years into a 40 year term im guessing the loan to value is pretty high - in which case you will probably struggle to get a deal as low as the current SVR. Personally id be making the most of the low payments whilst before they go up.

This might be useful - http://www.whatmortgage.co.uk/mortgage-calculator-what-if-i-over-pay-my-mortgage/

dannymccann

LTV is 75%, however 20% of that is a 0% interest free builder's loan, repayable in 7 years (10 from purchase).

We currently make full use of an ISA each year to save the money to pay that back, otherwise it will have to be renegotiated into the terms of a new mortgage product, which is obviously something I want to avoid at all costs!

I believe the overpayment is 10% of the outstanding debt in a rolling calendar year, we are with Halifax, before any penalties are incurred. We both work but with the saving towards the loan we can't really increase the overpayment too much. Once we have raised 27k to pay the loan we can increase that overpayment to £500 a month which will clear it in no time :T

I will look to increase the overpayment in the mean time though, probably try and convince the wife to up it to £150, I'll have a look at the calculator to see the difference

Shiny_button

Your rate with Halifax is likely to be 3.99%, their svr rate which is not a bad rate.
Pay as much as you can to reduce the debt but dont kill yourself doing it.
You might also find switching will not be easy as Halifax are one of the few that do the mortgage you have with shared equity.

kingstreet

If you can't afford to overpay further, you can't afford to reduce the term more than you can afford to overpay, if you see what I mean.

I agree with SB. It's no fun trying to remortgage on shared equity. The builder/agency has to agree to provide a deed of postponement to allow a remortgage to take place, otherwise your new lender won't get a first charge, preventing you completing. In addition, there are not too many lenders interested in shared equity business.