Question about remortgaging?

AFK_Matrix

I took out a 5 year fixed mortgage for my first house purchase and I still have just under 4 years to go but wanted to get clear in my mind about how a remortgage works when my fixed deal ends.

So in the time remaining I am hoping to save up around 40k. So what I wanted to do is get another mortgage and put this 40k towards it. Is this possible, what costs are involved, can i go onto another fixed deal?

Just wanting to get things all stright in my mind is all.

Thanks.

Crashandburn

So you are looking to pay in the £40,000 at the end of the fixed rate. Is that correct?

When you come to look at remortgages, you decide how much you need to borrow going forward using the money you have put into the deal as well as all the equity in the property. This is how the lender would work out your loan to value.

You would however look into the fact of how overpayments would work on your mortgage rather than putting the money elsewhere into savings depending on interest rates. If you can get 3% on your savings balance but you are paying 4.59% on your mortgage, then it would be far more beneficial to overpay into the mortgage if your overall intention is to do this anyway.

It might be worth a call to your current lender to see how they would view overpayments on the mortgage. Most of them would allow up to 10% per annum without any penalties and depending on your mortgage balance, this may be enough for your needs.

AFK_Matrix

Yes when the fixed rate was up I would remortgage and put the 40k into the remortgage.

I will look into overpayments as yes my mortgage interest is more than my savings interest. I have some money to pay back to my dad and then I want to get a good pot of money set aside for emergencies but then overpaying might be a good idea next year. Thanks for your advice.

Also I assume for remortgaging that you would have to pay an early repayment fee?

Brighty

Once your current fix deal ends in 4 years, you should be fee to remortgage with whoever you like with no early repayment fees. Fees are usually only when you are in a fixed deal.

Brighty

AFK_Matrix

Thanks Brighty, I will go home and dig out my T&C's and double check this. Great if it is the case. So if I overpay by say 40k in 4 years as I can overpay by 10% then the equity I would have is taken into account when I remortgage?

kingstreet

Either overpay regularly within the permitted limit, or wait until the end of the fix and pay off the lump sum the day after the expiry of any early repayment penalties (ERP).

Then;-

- establish your follow-on rate
- ask your current lender what customer retention products it has for your loan to value
- look at options to remortgage elsewhere.

Remember to factor-in any fees or costs, including any discharge or final fee payable to your current lender if you decide to leave them after the ERP expires.

Compare the options and choose the one which gives you the best value for money.

AFK_Matrix

Great thanks for all the info, its much clearer in my mind what happens with remortgaging and will check my T&C's regarding early repayment fees etc.

dimbo61

You need to dig out the paperwork about your current mortgage deal and read the T&C
Now even when on a fixed rate deal many lenders allow you to overpay by 10% of the outstanding balance each year. ( Please read the T&C,s)
Now as most people get paid monthly you could repay the debt to your Dad first and then build up your emergency pot in cash ISA,s
I would then overpay every month but keeping the overall overpayments less than 10% of the outstanding balance.
In 4 years you will hopefully have a much better LTV and get the best deals available when you remortgage.
Do not forget that every penny you can overpay saves you that amount TAX FREE at whatever rate you mortgage costs !!!!