Show me the way :-)

DELILLIAH_BUTTERCUP

Good morning

could I please ask your advice on which way you would go if you were me.

12 yrs left on a Northern Rock , now Virgin Money repayment mortgage

fixed at 4.09% for the next 3 years at a cost of £807 per month

total of 91k owed, 7k of that on a secured loan

house value at present approx 190k based on others in area

our joint salary is 58k per annum both in same jobs more than
20 years

I have decided that I would like to be rid of the mortgage to coincide with my 50th birthday:eek:. To do this I need to pay an extra £450 per month which is doable. My question is do I reduce the term by 5 years, or keep the same and just overpay. Also would there be any benefit in directing overpayments to the secured loan part of the mortgage which may get me browny points at the end of the fixed rate in 3 years time with an application to another lender?

By the time my fixed is up and say I do actually end up owing 55k at that point, it would mean that I would have 4 years left to get to the big 5O, is that a bit of an odd mortgage term 4 years.

Thanks for putting up with my ramblings....so many questions...never enough time!

Regards

Dellilliah

Jimbo1976

If i were you I would leave the term unchanged and overpay. Simply because it is a lot harder to get the term extended than to reduce it. If for some unforeseen reason you cannot maintain your overpayments at the same level you can reduce them for a period.

dimbo61

You are on a fixed rate deal so may find you can only overpay by 10% of the outstanding balance each year ( But you need to check with Virgin)
While you are on the phone ask if you can overpay the secured loan!!!!
This would be my number one target as you can move lenders if you clear the secured loan at the end of your fix.
There are some excellent 5 year fixes at under 3% now available with your LTV and it may well be worth you speaking to a " whole of market broker" to find out what deals you could have.
You need to take into account exit fees, ERC,s legals, searches, surveys ETC to work out if its cheaper.
Paying off your mortgage early will save you thousands of pounds of interest £££££

JimmyTheWig

As Jimbo says, if you can overpay this much without penalty then this is probably the best way to go. Means if you can't afford the extra one month you are able to get away without doing it. [The flip-side is that if you are not careful you will find yourself doing this frequently for little reason.]

As to paying the loan (do you mean unsecured, rather than secured?) off first, I presume that when you remortgage you can remortgage for the full amount that you owe and so it shouldn't matter from that point of view. In which case it would be best to pay off secured debt if it is at the same rate as unsecured debt.

As far as I am aware, the minimum term for a new mortgage is 5 years.

DELILLIAH_BUTTERCUP

Thank you for your replies, I do appreciate it

The secured loan attached to the mortgage was taken out to finance an extention some years back. When we remortgaged 2 years ago with Northern Rock both the original mortgage and the secured loan went to the same rate of 4.09%. It still shows up as 2 seperate balances so I guess I will direct my overpayments towards the secured loan part and I have sussed out I can overpay 10% of the total outstanding balance per year. Didn't realise this would stop me remortgaging elsewhere in the future so that will be my initial plan of attack:D.

As for seeking out a better deal elsewhere the ERC is a whooping £3780 alone, so having had a quick look I dont think I could benefit at this moment in time by jumping to another lender. But thanks for the idea anyway.:T

So, pay down the secured loan part first of all, then overpay the original mortgage until we get to the end of the fix in 3 years time. Then hopefully left with a 55k (ish) mortgage balance and see where the mortgage world is then...ltv should be in the region of 28% and it would mean less than 1 x joint earnings ratio which with any luck should get us a good rate;)

Many thanks. Delilliah

JimmyTheWig

DELILLIAH_BUTTERCUP wrote: »

The secured loan attached to the mortgage was taken out to finance an extention some years back.

Ah, ok. This will be secured, then, as you said. [Just asked as some Northern Rock mortgage customers have unsecured loans attached to their mortgage.]

When we remortgaged 2 years ago with Northern Rock both the original mortgage and the secured loan went to the same rate of 4.09%. It still shows up as 2 seperate balances so I guess I will direct my overpayments towards the secured loan part and I have sussed out I can overpay 10% of the total outstanding balance per year.

I don't know about Northern Rock, but with Santander at least you can only overpay 10% of any one loan in a year. Which would mean only paying off £700 of the second loan.

Didn't realise this would stop me remortgaging elsewhere in the future so that will be my initial plan of attack:D.

I don't see why you can't remortgage elsewhere for the total sum that you owe to Northern Rock in the future. Can't see this second loan stopping you from remortgaging. Only issue may be that early redemption periods may differ on the two.

As for seeking out a better deal elsewhere the ERC is a whooping £3780 alone, so having had a quick look I dont think I could benefit at this moment in time by jumping to another lender.

With those ERCs, I'd agree!

we get to the end of the fix in 3 years time. Then hopefully left with a 55k (ish) mortgage balance and see where the mortgage world is then

As I said above, a new mortgage would probably have to have a minimum term of 5 years.
But I don't know what would happen if you got, say, a three year fixed rate and then paid the mortgage off in full in the fourth year. Would need to be a question to ask when shopping around. But, either way, it doesn't affect your plan for now.

kingstreet

When we remortgaged 2 years ago with Northern Rock both the original mortgage and the secured loan went to the same rate of 4.09%.

I think the OP is using "remortgage" to indicate a new product from the existing lender, rather than the replacement of all the secured borrowing with a new mortgage from a new lender.

The OP would indeed be able to remortgage, in the true sense of the word, to a new lender and repay the existing secured borrowing in full, when advantageous.

I agree with JTW. I don't see a big enough saving to make it worthwhile paying the ERP to get out of the current rate.

DELILLIAH_BUTTERCUP

Sorry I got my terminology incorrect. I actually took up another fixed rate product with Northern Rock, not a remortgage with them. I have just checked to see if I could overpay the secured loan part and Virgin as they are now said I was ok to pay it as long as my total overpayments were not more than the total 10% balance of the whole amount owed.

Thanks for your time in helping me:D

Regards, Delilliah

dimbo61

Every penny you can now pay will save you 4.09% TAX FREE so overpay as much as you can over the next 3 years.