First Time Buyer Added 40K of Value can I have my monthly payments reduced?

bendyspoon

Hi All,

I'm looking for a bit of guidance if possible before I call the bank.

To explain: I bought a property in May 2013 for the sum of £95,000.

I paid a 10% deposit & took my First Time Buyer Mortgage out with HSBC. The property required a lot of work doing to it to make it liveable which has now being done & I have moved into the property.

The property is now worth in the region of £130,000/£140,000 (not actually had it valued yet)

My question is now my loan to value is nearer 60% / 65% although my actual mortgage is 90%. Is there anyway of reducing my monthly payments to reflect the rise in the property value? Or will I have to wait until my 2 year fixed period is up before I can do anything?

Thanks in advance

ACG

How long are you tied into your deal for?
You can pay to have it revalued and if there are any early repayment charges pay those to switch products - but chances are by the time you have paid all of those you wont be much better off?

Also as it has only been 5-6 months the lender may have issues with how you have added so much value in such a short space of time (i know it can be done as i did something similar - albeit not as much and it took closer to 9 months) but some lenders/valuers have issues with it.

Foxy-Stoat_3

Whats your current interest rate?

My FTB mortgage rate when from 4.99% to 3.99% (75% LTV) after the 2 year fixed period ended and my payments went down by £80 a month.

So unless your on a very high rate its probably not worth you doing anything until your fixed deal is up and find another lender with a better rate.

bendyspoon

I am tied in for 2 years fixed at 4.15%.

If I remortgaged then I think it would reduce my payments by about £70 a month. I'm not sure what my exit fees would be though, is it generally a fixed amount or do they charge you a percentage?

The value was added by long days, blood sweat and tears we picked the house up dirt cheap before it even got on the market.

We have done everything from replacing floor joists, new windows doors, new kitchen & bathroom, full re wire & re plumb, the whole house has been plastered & decorated throughout.

ACG

I did the same - albeit not so much work, a new bathroom/kitchen rewire and gch installing, a few stressful days... i can relate to it.

Im not sure with HSBC, usually though it is a percentage, you will have had a 3-4 page document and on there it will have the ERCs. I imagine it will be 2% year 1 and 1% year 2 but its worth checking. Its just very rarely cheaper.

Ive only seen the odd one that works out better and that dates back to when interest rates were 5-7%, where as now theyre half that. But in the main its rarely financially worth it.

laidbackgjr

At a quick guestimate, I'd suggest your early redemption penalty will be around the £3,000 mark, so by the time you've paid this and a mortgage application fee, valuation fees etc. You'll not recover the costs by saving £70 a month in the 18 month period before you could remortage with far lower fees.

bendyspoon

Excellent, thanks for the heads up and knowledge of previous experiences. I will try check my documents when I get home or I might just call HSBC & check with them what they say.

opinions4u

I am tied in for 2 years

Which probably gives you the answer.

somethingcorporate

It's unlikely that all that work would really have added 40-50% value onto the house anyway.

I don't think it'll cost in to do anything before your fixed rate expires - you should have got a mortgage with no/little exit fees.

Twiggy_34

Hi Bendyspoon, I'm just wondering how you got on with this, if you did anything further at all. After Martin's slot on 'This Morning' this morning I decided to look into the same thing as you were.

We're in a slightly different boat as we are 1 year into a FTB 5 year fixed term, but have also added £40k to our property value (bought for £80k). Re-mortgaging on the new valuation gives us an LTV of 55%. Having used HSBC mortgage calculators, we could reduce our term from 20 years to 15 and the monthly repayments would be £20 more than we are currently paying (but still £50 less than we are actually paying with overpayments, so we could continue with overpayments).

I do think everyone's approach to this has been slightly wrong in their responses, while the costs might be high, and the monthly savings minimal, you have to look at the bigger picture. Based on our current arrangement with the bank we are looking at paying interest in excess of £35k over the life of the mortgage. But if we were successful in transferring to a lower rate mortgage over a shorter term (still fixed for the first 5 years to make the most of the low interest rates) we would only be looking at paying interest of just over £18k over the life of the mortgage. To me that strikes me as a no brainer surely?!

I have literally only just started looking into this though and have yet to read up fully on any penalties we might have to pay to exit early. I'd welcome input from anybody who notices a fatal flaw in my perception of how this works?!

Edit: I've also calculated what the saving would be just looking at the 5 year fixed period given as the fixed period is the only guaranteed state in this whole equation. Looking at where we would be 5 years from now on our existing arrangement, compared to where we could be if we switched today, the savings would still be in excess of £7000, together with the reduced term from 20 to 15 years, and not including any overpayments. Admittedly the exit costs could in fact make this a no go situation compared to the previous figures... I still intend to investigate further though!

laidbackgjr

Twiggy_34 wrote: »

I do think everyone's approach to this has been slightly wrong in their responses, while the costs might be high, and the monthly savings minimal, you have to look at the bigger picture.

Sorry, but I think your looking at it wrong, you are looking at the savings over the lifetime of the mortgage, you would be able to achieve most of these savings by re-mortgaging at the end of the fixed term, you need to purely compare the savings over the term with the cost of exiting the fixed term.