Mortgage Switch Quandry

Lifes_Grand_Plan

Hi folks,

I'm in a bit of a quandry and would appreciate some advice on what to do with my mortgage.

Current Mortgage:
HSBC Lifetime Tracker = 2.69% - £72,000 outstanding
House is valued at approx £130,000.
Have overpaid since day one, normal monthly payment about £450 ish but I pay £1000.

Thinking of switching to Britannia 5-year fix @ 2.79% so 0.1% higher rate but I think it might be worth it for 5 years security.

However - subject to finding jobs my wife and I would like to move nearer to her parents as soon as possible. Realistically with the job market how it is, that could be years rather than months but who knows....

If / when we do move then we would look for houses at about £250,000. Assuming ours sold for £130,000 with £70k outstanding in the mortgage, would leave us with needing a further £120k on mortgage.

If we are fixed with Co-Op, I believe the following would apply = we could port the £70k @ 2.79% to the new house and would then need to apply for a second mortgage which would have LTV calculated as the full mortaged amount on the house (i.e. (£70k + £120k) / £250k x 100 = 76% LTV. (Will say 75% for cimplicity).

If I am right so far, that would leave us with:
£70k @ 2.79 and then
£120k @ 3.39 (best 5 year fix I can currently find on Britannia site - obviously could change by the time we move).

Is that right so far?

Part two:
If I do move to the 2.79% fix, am I better to continue the overpayments as present, or put it into savings with a view to reducing the £120k portion later which would be at a higher rate, even though it would probably achieve less than 2.79% in a savings account now?

Apologies for long post, look forward to your thoughts.

jamesperrett

As I understand it, mortgage rates aren't going up in a hurry - if anything they could possibly go down a little so it may be better to stay where you are for a while and wait until you actually decide to move house before changing providers.

Crashandburn

Don't think there is one right answer as lots of different factors to consider.

Main thing I would say is making sure that incomes etc fit the profile for topping up with the Britannia.

If you lock into the 5 year deal, come to move and they won't lend enough, then you are faced with paying a fee to come out of this deal to find a lender that will provide the loan amount required on the new home.

There is an argument to fix in one at a low rate and then topping up with the same lender at the point of moving, but you are gambling on how competitive Britannia will be at this stage. They are usually within the top 10 percentile of deals but you are open to changes. Being totally free at the time of moving does give you more choice

Good luck

Thrugelmir

Lifes_Grand_Plan wrote: »

If we are fixed with Co-Op, I believe the following would apply = we could port the £70k @ 2.79% to the new house and would then need to apply for a second mortgage which would have LTV calculated as the full mortaged amount on the house (i.e. (£70k + £120k) / £250k x 100 = 76% LTV. (Will say 75% for cimplicity).

Max LTV is 60% @ 2.79%

So I would expect Britannia / Co Op to decline the port application.
As total new borrowing exceeds this threshold.

Crashandburn

Thrugelmir wrote: »

Max LTV is 60% @ 2.79%

So I would expect Britannia / Co Op to decline the port application.
As total new borrowing exceeds this threshold.

Which I think the OP has acknowledged by looking at the 3.39% rate for the top-up on the ported application

Thrugelmir

Crashandburn wrote: »

Which I think the OP has acknowledged by looking at the 3.39% rate for the top-up on the ported application

That's on the new borrowing only. Not existing.

Lifes_Grand_Plan

Thrugelmir wrote: »

That's on the new borrowing only. Not existing.

Ah, the guy on the phone made no mention of that, thanks for raising.

I was told that the 2.79% fix would stay at that and be ported to the new house but only the new bit would be based on the LTV of the new house.

I thought it sounded too good to be true.

Looks like i'd be better sticking as I am for now then if Thrugelmir is definitely correct.

Crashandburn

Lifes_Grand_Plan wrote: »

I was told that the 2.79% fix would stay at that and be ported to the new house but only the new bit would be based on the LTV of the new house.

I thought it sounded too good to be true.

I would get this aspect confirmed in writing from them. You are not breaking the deal on the 2.79% fixed but just make sure that in the mortgage offer part 10 that it confirms it can be ported to a new property.

Most lenders would allow you to keep any existing deal and top up with any new deals at the time of moving. The only reason you would need to break the 2.79% is on the basis it is not portable.

As said, they may wish to keep the 2.79% LTV deal within the same parameters on the new property but on this basis you would be looking at £70,000 on a property worth £250,000. The time this issue would rear its ugly head is when you downsize and reduce the mortgage balance

michaels

If you did want to go for the deal now it is probably worth borrowing the max you can against the current property (tell them you need the extra funds for an 'extension') you can then immediately put 10% of the extra into the overpayment fund and any other extra in to the best savigns account you can find - this will then maximise the amount you have borrowed at the cheap rate when you come to move.

Personally though I would probably wait o the current deal if you are fairly certain the move will take place in the next 12 months.