Which is the best deal?

em_z

After some v helpful advice on here, I'm looking to switch my mortgage from Halifax SVR 3.99% to Co-op 5 yr fix 3.29%. It seemed straighforward on the surface, however, when I dug out the mortgage paperwork I remembered that I'm on 2 rates with the Halifax.

Rate 1 - SVR of 3.99% on 85k
Rate 2 - 1.99% above BoE rate on 21k (think this works out at 2.49%)

I'm struggling to work out which is the better deal. Stay with Halifax or switch the whole amount to 3.29% with Co-op.

The term with Halifax is 38 years, yet the Co-op have offered to reduce this term by 12 years by increasing the payments by £70p/m. I currently pay £432 with Halifax, payments would be £500 on the 5 yr Co-op fix.

Any ideas would be much appreciated! Ta!

em_z

Bumping this. Can anyone help?

kingstreet

It depends on what term you want?

Do you want the shorter term, with higher contractual payments?

Do you want the longer term with lower contractual payments where you could overpay voluntarily to shorten the term when it's convenient for you?

em_z

I plan to overpay anyway, by setting up a standing order so I don't miss a month. I thought that by having a shorter term more of the capital will be cleared earlier?

kingstreet

A longer term with a normal payment and a voluntary overpayment, totalling say £500 per month has exactly the same repayment schedule as a shorten term mortgage with a contractual payment of £500 per month.

You'll pay them both back at exactly the same point if the rate is the same.

Do you wish to be compelled to pay the higher figure, or would you prefer to be able to pay a lower minimum payment, in the case of unexpected expense?

em_z

Ah right, the mortgage advisor said a shorter term would be better in the long run, even though I told her I intend to overpay for the whole fix. She seemed v keen on me taking the shorter term, and implied that more of the capital will be cleared.

I'm just conscious that the Halifax rates could increase (they raised the SVR last year) and the fix would offer protection against rate rises. Would the best option be to have a longer term with the Co op then? Maybe 30 years? I've never remortgaged before so all this is new to me and am keen to make the best money saving decision! Thanks

kingstreet

I can't tell you what's best for you.

Only you can decide if you would be best suited by a fix, or by a longer or shorter term.

I normally spend an hour or two getting to know my clients before I'd presume to know what was in their best interests.

em_z

Ok thanks. The mortgage advisor reckons I cou,d easily afford the payment at the 26 year term, however, I think I would rather have a longer term and overpay, if the same amount of capital comes off the mortgage.

I'm definitely more comfortable with a fix, so I know for sure what I will pay each month. And it seems to make sense to have the flexibility of a longer term and lower monthly payments, but still overpay as much as possible each month. Will the mortgage advisor re-do the quote without any issues or will she be a bit peeved? Thank you.

JimmyTheWig

There's two different questions here...

em_z wrote: »

Rate 1 - SVR of 3.99% on 85k
Rate 2 - 1.99% above BoE rate on 21k (think this works out at 2.49%)

I'm struggling to work out which is the better deal. Stay with Halifax or switch the whole amount to 3.29% with Co-op.

This question is asking what the better deal is between the two.
With the current Halifax deal you are paying 3.69% on average. So the 3.29% with Co-op is cheaper.
Obviously you'd need to look at any fees to be able to confirm that this is actually cheaper, but it sounds like it is.

The term with Halifax is 38 years, yet the Co-op have offered to reduce this term by 12 years by increasing the payments by £70p/m. I currently pay £432 with Halifax, payments would be £500 on the 5 yr Co-op fix.

This question is asking about the merits of reducing the term.
The more you pay each month, the quicker you will repay your mortgage and the less interest you will pay.
You can either do that by reducing the term or by making voluntary overpayments.
The advantage of a long term and overpayments is that you can be flexible - e.g. pay more in March than you do in December if that suits your budget.
The disadvantage of this is that it requires some willpower as you might end up not making the overpayments that you planned. I.e. you might argue yourself into beliving that just about every month is a tough month.
That's a decision for you to make based on yourself and your circumstances.
The other question is is there a limit to the amount you are allowed to overpay by, and will you hit that limit with your plans?

em_z

Thanks Jimmy. I've been overpaying religiously for the last few years via standing order, so have the willpower for it. I intend to increase the overpayments once I've sorted the remortgage out. I went into the meeting with the mortgage advisor with the intention of keeping a longer term and overpaying, but she was so convincing that a shorter term would be in my best interests, I started to think my reasoning was flawed!

Also, thanks for confirming my maths with the interest rates!

em_z

Sorry, I can overpay 10% each year and I'll be within that bracket with the total overpayments each year.