SVR - do you have to remortgage

TheGame21

We're currently looking at mortgages at the moment as we are first time buyers. Is it best to go with a lower interest rate at the moment for the fixed period even though SVR after the fixed period is quite high or is it best to find a lowish current interest rate and one which then has a lower SVR rate as well?

When we go on the SVR rate after the fixed period, do we have to remortgage to get on a better deal if it is high? In people's experiences, how easy is it to do this?

GMS

You can choose to leave a mortgage at any time. There may well be early repayment charges due but when on SVR you should be clear of penalties.

SVR needs to be a consideration. If it is higher than others now then consider what would happen if you couldn't remortgage for any reason.

Are you looking at Accord Mortgages by any chance?

TheGame21

No looking at a another one, it is currently 3.79% however then switches to 5.69% SVR. I have seen others which have are 3.89% then to 3.94% SVR. It is tempting to go with the lower rate now but then that one has a high SVR. With the other SVR we wouldn't need to remortgage as it is only slightly higher.

bigadaj

TheGame21 wrote: »

No looking at a another one, it is currently 3.79% however then switches to 5.69% SVR. I have seen others which have are 3.89% then to 3.94% SVR. It is tempting to go with the lower rate now but then that one has a high SVR. With the other SVR we wouldn't need to remortgage as it is only slightly higher.

On those differentials the. Go with the initially more expensive one, 0.1% is peanuts.

TheGame21

Have seen one at 3.19% fixed for 5 years then going to a 5.69% SVR with a product fee of £995. Compared to the 3.89%, is it worth going for this lower rate for the fixed period, then remortgaging?

R_P_W

Don't be afraid of remortgaging. Svr can change!

TheGame21

If we borrowed £192,000 at that rate however the amount to pay back across the mortgage term was £337,000, when we came to remortgaging after the 5 year fixed period, would the required mortgage valuation be 192 - amount paid so far or 337 - amount paid so far. If it is the latter then that will pose a problem because the value of the house we are buying is only 240k.

kingstreet

The total amount you pay is just a guide. Like the APR. It assumes the rates stay the same for the whole term and that is unlikely. It has no other significance, so ignore it. It isn't like a personal loan where the interest is added at the outset and you owe all that if you want to pay it back early and have to get a "discount."

When you remortgage, you repay what you owe then, plus any discharge fee paid by your lender.

If you borrow £192k, you'll owe about 86% of what you started with on a 25 year repayment mortgage, or £165k.

If the property value is still the same, you'll be looking for £162k on £240k, or a loan to value of 67.5%.

If I had a choice of rates only slightly different and one had an SVR of under 4% and another nearly 6%, I'd pick the one with the lower SVR as you never know what rates might be doing in the future. If a lender needs to have a higher SVR now, it may well have the same 2% differential later when rates are higher, perhaps when your circumstances have changed and you can't remortgage?

TheGame21

The problem is we've seen another mortgage which 3.29% for 5 years then jumps to the SVR of 5.69%. Obviously there is a difference between 3.89% and 3.29%. In this situation, is it not worth going for the lower rate and then remortgaging? I mean there is no gurantee the lower SVR won't rise. I understand about circumstances and remortgaging and this our main worry.