Re-negotiating a 5 year fixed mortgage mid term

here_to_learn

Hello all,

A debut post here.

My partner and I are 18 months into a 90% LTV 5 year fixed rate mortgage on which the rate is 5.89%, we have made all payments on time to date and have no problems making the payments. At the time we were purchasing our first property the mortgage market had just re-opened and there were not many deals for first-time buyers and given the climate back then (mid 2011) we decided to be very cautious as there was a lot of uncertainty as to what would happen with interest rates and the economy etc.

However, since we purchased our property the value of apartments in our block has risen ~10% based on recent registered sales prices which would mean that if we remortgaged we could probably get an 80% LTV deal without having to put in much additional equity. This, in addition to the fact that I can see our current mortgage provider offering 5 year fixed rates of 3.79% (for 80%LTVs), has motivated us to try and re-negotiate our mortgage. We would prefer to re-negotiate with our current provider as remortgaging with an external provider would lead to an ERC of 4% of the mortgage (although that will fall to 3% in August). Although even we had to pay an ERC in order to remortgage to a deal with another provider we would still be better off according to our analysis once the new mortgage is below 4.2%.

We are trying to better understand whether our mortgage provider will actually be open to re-negotiating our current mortgage or not and how best to approach them regarding this? Our initial thought is to call them and ask them straight up about the feasibility of doing this.

Does anyone have any advice on how to go about this, whether it is possible, what information we should have to hand when approaching our provider, should we do this through a broker or financial advisor (e.g. would that increase likelihood of success), how should we pitch this to our provider etc.? Any other advice?

All advice gratefully received.

Ianh82

you would have to finish your current deal early and 'pay off the mortgage' with the new deal and probably pay any early repayment charges written in to your contract - i want to do the same but i have 7 months left out of my 5 yr fixed rate and santander want £3.5 k still to change products

you would also have new product setup fee's etc.

but, if the monthly repayment and all charges worked out cheaper for you, then it may be worth doing inc a large early redemption penalty - if you have one.

i worked mine out, currently 5.75% fixed with a offer of 3.75% one a few months back and my repayments would drop £100 per mth ish inc the redemption penalty etc so would be beneficial over the long term

here_to_learn

Thanks Ianh82. Another option is to wait until August when the ERC drops significantly and to hope that the same deals are still available then.

Yorkie1

I have frequently read on here that if you come out of a fixed term early, your current lender won't offer you a new product - you need to go elsewhere to remortgage.

Obviously, you'd need to check, but don't assume you will be able to move to another of your current lender's products.

kingstreet

Nationwide won't allow you to pay the penalty and offer you a new deal. You actually have to leave them.

Others are more flexible and will give you a customer retention product, in return for the fee payment.

here_to_learn

thanks all for your responses.

Kingstreet - I've not heard of a customer retention product with regards to mortgages (I understand the concept in principle) how are these different from the products which are on offer in the market? Do they usually offer you what is in the market, something better or something inbetween what you have and what they are offering to other remortgagers?

kingstreet

Customer retention deals are the products for existing borrowers not moving home.

FTB products - self explanatory.
Home movers - subsequent buyers.
Remortgage - moving mortgage to new lender on same property.
Further advance - additional borrowing, same lender, same property.
Customer retention - existing borrower not moving home.

In many cases, customer retention products aren't as good as what new borrowers can expect. What Nationwide referred to as "introductory shagpile" in one of its ads.

Make sure you compare any options from your current lender against remortgage options available to you elsewhere.

here_to_learn

once more thanks Kingstreet

dimbo61

Do you live in a nice part of London where prices have gone up in the last 18months?
10% rise in value in that time !!!!
You have to hope that the surveyor from any lender thinks your property is worth 10% more than you paid for it only 18 months.
The cost of paying the ERC and other fees to change lender would I think far out way any savings on mortgage payments.
Best course of action is read your T&C,s and if allowed then overpay every penny allowed ( most lenders allow 10% overpayment)
Save you 5.89% TAX FREE