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

Goldiegirl

My comment would be that the owner nearly always over estimates the value of their property.

The lenders valuer does a valuation for mortgage purposes, and the figure arrived at often causes disappointment for the owner.

Just be aware that the property may end up being valued for less than you hoped, which may stop the plans in their tracks anyway

Dave_the_Ginger_Cat

Twiggy_34 wrote: »

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!

You're right to do the sums on this fixed period only. To be more purist, you could look at paying exactly the same as you do today, and working out how much the balance reduces by at the end of this period, or looking at the savings in this period. Either works

I feel inspired to write a little model which works out where the threshold is. Give me an hour or two, and PM me if you're interested

Twiggy_34

laidbackgjr wrote: »

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.

No need to apologise, but I am curious to know if anyone else agrees with this statement as I'm still not convinced. You're right that I am looking at savings over the lifetime of the mortgage and, as stated in my edit, the only guaranteed state is that during the fixed period, but aside from this, surely it goes without saying that if you can bring the payments down faster in the earlier years of a mortgage, that will have the biggest impact because the interest is being calculated on larger sums of money and will reduce how much interest is being paid on interest?!

In addition, if the interest rates should be higher after the fixed term ends and it is difficult to get such a good deal, at least you're being charged interest on a smaller sum of money compared to what would have been had you not cleared so much earlier on...

I do realise that there is no real way of knowing where things will be 5 years from now, but I still see it as being a way to potentially be far better off in the long run than if you hadn't remortgaged. But only if the fixed period alone enables you to claw back at least the costs of remortgaging in the first instance?

Twiggy_34

Goldiegirl wrote: »

My comment would be that the owner nearly always over estimates the value of their property.

The lenders valuer does a valuation for mortgage purposes, and the figure arrived at often causes disappointment for the owner.

Just be aware that the property may end up being valued for less than you hoped, which may stop the plans in their tracks anyway

A very valid point that not everyone will have thought of!

We got an estate agent valuation about 6m ago as we were curious to know what value we had added to the property and they suggested a valuation of £120-£125k (but realise that other valuations could come in quite different).

The chap who did the valuation for our mortgage provider and came to see the building when it was still in turmoil said he estimated the value to be around £100k once the work was complete. So I'm reasonably confident that an updated valuation would achieve at least that much, but hopefully more. This may be a naive assumption, but I imagine they probably undervalue at that point as they would be unable to foretell what standard of work will be achieved, or even what extent of work will be done.

Kynthia

Twiggy_34 wrote: »

No need to apologise, but I am curious to know if anyone else agrees with this statement as I'm still not convinced. You're right that I am looking at savings over the lifetime of the mortgage and, as stated in my edit, the only guaranteed state is that during the fixed period, but aside from this, surely it goes without saying that if you can bring the payments down faster in the earlier years of a mortgage, that will have the biggest impact because the interest is being calculated on larger sums of money and will reduce how much interest is being paid on interest?!

In addition, if the interest rates should be higher after the fixed term ends and it is difficult to get such a good deal, at least you're being charged interest on a smaller sum of money compared to what would have been had you not cleared so much earlier on...

I do realise that there is no real way of knowing where things will be 5 years from now, but I still see it as being a way to potentially be far better off in the long run than if you hadn't remortgaged. But only if the fixed period alone enables you to claw back at least the costs of remortgaging in the first instance?

I agree that should can only compare the cost of staying within your fixed term to the saving you make in the same period should you change plus the early redemption fee. Otherwise you aren't really comparing like with like. If you want to shorten your mortgage life then you can overpay either way, but it shouldn't be included in the calculation of whether you would be better off if you leave your current deal early.

Twiggy_34

Ok, so the latest update is that our early repayment charges are 1% of the amount repaid early for each remaining year of the fixed rate period, reducing on a daily basis. The maximum charge we could pay is £3569.53 (if the date of repayment had been 2.3.12). £1668.21 on 30.9.14. So we're somewhere between those figures at present. But of course I'd need to investigate further to establish what other costs we'd have to take into consideration.

I'm hoping I've looked at these figures in the right way, below are the figures I've gleaned using online tools/calculators demonstrating where we would be 5 years from now in each scenario:

Existing mortgage (Balance £64,658 - Total interest payable £31,102)
Owing = £64,703
Principal = £49.278
Interest = £15,426

Proposed mortgage (Balance £64,658 - Total interest payable £17,349)
Owing = £54,671
Principal = £46,534
Interest = £8,137

I'd be grateful for any further thoughts/opinions based on these figures. I have to admit that even this little bit of number crunching has left me brain-dead!