A new Mortgage Free Wannabe!

Hey everyone,

So myself and my partner have the following;

Initial price:£89,995
Initial mortgage value:£80,995
Initial Interest and Term:5.79% fixed for 2 years on a 25 year mortgage.

It expires on our next payment (15th Feb 2013).

We have done extensive work to the property, including new kitchen and bathroom, full CH system (previously only storage heaters and a multiplying water heater) and a general sweep of the house to very high standards (if I do say so myself! :rotfl:)

We now owe £78,000 over 23 years.

I value the property at £100,000 based on properties on the street ranging from £95,000 to £130,000 in the last 2 years AND me being realistic.

Looking at several mortgage calculators online, I imagine I could get a mortgage on a 4.39% fixed term for 5 years, over an 18 year term, for £520p/m and overpaying by £80p/m potentially saving £7000, 3 years and 5months

Our current variable rate is 3.99% Halifax, putting our potential mortgage at £432p/m over a 23 year term, we could afford to overpay £78-178p/m potentially saving us £17000, 9years and 2 months

Would it be worth fixing or staying on the variable and overpaying?
Mortgage Free Wannabe
Currently £90,000+/- over 18 years!
Best MoneySaving Moments of this year?
- I saved £150 by repairing my MacBook myself using online guides!
- I went back to Uni, so I've purchased a TOTUM (NUS) Card
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Replies

  • SandstoneSandstone Forumite
    105 Posts
    Ninth Anniversary 100 Posts Combo Breaker
    Hello BlueMoonMole!

    Those are not your only options.

    As you know, a variable rate places you at the mercy of the lender, who is free to adjust the rate at their discretion.

    Have you considered a tracker mortgage? Most analysts don't think that the Bank of England base rate will change for the next few years, so, it could potentially be a lot cheaper.
    Even if it does rise, you can calculate how much it would have to rise by to become the more expensive option.

    For example, my mortgage is BR+2.09. Bank of England Base Rate is currently 0.5%, (and has been for almost 4 years) so my rate is currently 2.59%.
    It had no fee, and allows unlimited overpayments.

    That works out a lot cheaper than either of your options (3.99% Halifax variable or 4.39% 5yr fix) and you can still fix at any time.

    Obviously, it could rise, but by that time, I will have enjoyed a longer period of the low rate, allowing me to pay off more of the capital, and the higher rate will only apply to the remaining balance. I can also fix it at any time, if I see a fixed rate deal that I want instead.

    It's also worth considering "offset" mortgages - search MSE for more details. I think Martin did an article on these already.

    Best of luck on your journey and keep us updated!
    Saving money for everything and everyone.
  • Firstly, thank you for your reply.

    Now, I have done a LOT of research since Christmas, knowing my term is almost up, and I have looked into the Offset's but I have NO savings whatsoever!

    I have pumped the majority of my earnings into the property, holidays, an engagement ring for my fianc! and we currently drive a sports car which guzzles fuel (we are looking at a more fuel efficient vehicle)

    May I ask, who is your Tracker with? And what happens when the base rate does rise? How much notice are we normally given? How risky is it? etc.

    Also, how long is the process of joining a fixed term, from say, a Tracker? What is the risk that we end up in another 'black Monday' and ridiculous rates?

    I like to know what's coming and going, so Fixing seems sensible to me, but then, so does 2.6% and unlimited overpayments!

    Our only gripe is, we are also considering that we may not be here forever OR we may end up buying a holiday home abroad.
    Mortgage Free Wannabe
    Currently £90,000+/- over 18 years!
    Best MoneySaving Moments of this year?
    - I saved £150 by repairing my MacBook myself using online guides!
    - I went back to Uni, so I've purchased a TOTUM (NUS) Card
    - I saved 6 months of Amazon Prime by signing up to Amazon Prime Student
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