Critique this remortage plan for me please!

bugbyte_2

Hi all, anyone have any opinions on this plan?

We are up for remortgage end of August for 81K, but need 105K to extend the kitchen. The loan to value is about 20% and our wages easily cover the repayments.

I would like to retire from my current job for a second career in 13 yrs time, so look to pay off the mortgage by then.

To keep things stable, I have picked N&P's 5 yr fix at 2.74% £295 fee as it seems the best deal at the moment, and will reconsider my options in 5 yrs time.

Repayments for 13 yrs are £809.

However, if I take the mortgage out for 18 yrs the repayments are £622, which gives me some options:

I can overpay (up to 10% of loan) to bring it up to £809;

I can put the extra £187pm in a savings account to gain higher interest then overpay at the end of the year (worth about £44 extra per year);

I can kill my boss and not worry so much about the mortgage.

Is there any downside to the 18 yr plan?

Is there a better product out there for my circumstances?


Thanks in advance, Bugbyte.

dimbo61

Will you get more than 2.74% after TAX from savings accounts ?
Better to just overpay every month by £187.
You need to check how much you can overpay every month !!! Many lenders only allow 10% of the outstanding balance each year.
You also need to see if the lender is happy to lend you £105K not if you can afford the payments.
Good luck with the new kitchen extension

dimbo61

I have not looked on the N&P website but have you got the right LTV for that deal?
I love offset mortgages and use our savings to offset the mortgage interest ( well some of it )
We have overpaid every month ( standing order ) for the last 7.5 years and the end is in sight.
We consider the larger mortgage payment our Normal cost each month.

bugbyte_2

dimdo61 congrats on seeing the end of the ( mortgage ) tunnel! Although I can see the benefit of offset, most of our savings are in ISA's, funds and commodities, which currently pay out more than 2.74%.

We are disciplined enough to consider any over payment to be a normal cost. I think we can over pay by 10% or £10,000 whichever is lower every year. Even if we took out a 20 yr loan @ £569 pm and over payed by £240, it would still only be £2880 py - well within the rules. I probably will not bother with holding the over payments in a separate account, but if savings accounts do suddenly become competitive I may consider it.

Thrugelmir

bugbyte wrote: »

which currently pay out more than 2.74%.

Though one assumes that your fixed term products are maturing. So what will you roll over into? Fixed 3% for 5 years hardly worth seems the bother.

bugbyte_2

Thrugelmir wrote: »

Though one assumes that your fixed term products are maturing. So what will you roll over into? Fixed 3% for 5 years hardly worth seems the bother.

When my fixed rate savings have matured I have bunged them into passive tracker funds with a 10 yr + view. I have kept the Index Linked Saving Certs as my cash back up.

Thrugelmir

bugbyte wrote: »

When my fixed rate savings have matured I have bunged them into passive tracker funds with a 10 yr + view.

If you've benefited from the rise in markets in past 12 months. Maybe an opportune moment to cash in. Certainly a consideration of mine. With one European Investment Trust up 48% in the past year.

jstallan

@bugbyte My plan was similar to yours when we moved house nearly 4 years ago. We needed to move house (not going to explain) and in reality it was a year ahead of perhaps what we could afford. I knew that if I could 'tough it out' for a year a long financial commitment (CSA) would end and monthly finances could be diverted towards a mortgage.

I took a 5 year fix with the Nat West <40% LTV on an interest only basis. I new full well I could meet the monthly costs if it were a 'repayment mortgage' but only after the first year. We moved, I made 12 months interest only payments, and then increased the payments to exceed what we would have paid on a 'repayment mortgage'.

You need to be disciplined.