End of fixed term mortgage - Advice

jonathan_1983

Looking for a bit of advice as this is the first time I will remortgage.

I am currently on a 2 year fixed rate at 5.79% and this term is coming to end in the near future. I have been to see my mortgage advisor who has suggested a few different deals.

The best one (in my mind) is a fixed rate mortgage at 3.14% for five years with Santander. The house was bought for £90000 and it was a repossession. The above quote is with the house 'valued' at £110000. The reasoning for this valuation is that recently sold houses on my street have been £104000 and and £102000 and they were both 2 bedroom houses and smaller gardens etc. My house is 3 bedrooms, corner plot and has had improvements made to it such as rewiring, new boiler, new door, new floors (in parts of the house) and other bits and pieces.

I know a house is only worth what someone would pay for it and that Zoopla (£120000 estimate) for example can be way off but how likely would it be for a surveyor to come round and value it at what it's been put down on the application form?

Nothing has been applied for yet, the only thing I don't want to happen is for this valuation not to go through and start leaving credit check footprints and going through the whole process again.

Last thing about the five year fixed rate deal, it carries a large product fee (£995 I think), is that normal even for remortgaging?

Thank you in advance for your advice.

hamster2013

what will be your new interest rate once fixed is finished?
even with a product fee of £1k, you will be in a better position in 2018

I will explain, imagine worst case scenario, you took up a 100% mortgage of the £90k
therefore, you borrowed £90k over a span of 25 years at a 2y fixed rate of 5.79%

after 2y, you owe the bank around £86.7k

if you shift to a 3.14% over 25y with a remortgage ... after the fixed term of 5y (in 2018), you will owe santander around £74.5k
and would have paid them £1k in fee's, add that to the balance, and relatively speaking, you would 'owe' them £75.5k

if you stay with your current provider, and I will assume the rate will stay the same for 5 years , and you will be continuing your existing 25y (so 23y to go).... in 2018... you will owe them £76.34 - so almost a grand worse off

kingstreet

At lower mortgage amounts, a fee-free product may be more effective, but you'd need to compare the rates/interest/fees and the amount outstanding at the end of the fix to establish the best option.

I'm mot suggesting anything untoward here, but Santander pays a broker 0.5% commission on five year fixed rates, opposed to the usual 0.33% and other lenders pay around 0.33% as well, even on a five year fix.

jonathan_1983

Thanks for replying.

After the 5 years, the variable rate would be 4.74% (whether it will be then no one knows!). If I stayed with Natwest, the variable rate would be 4% when I finish this current 2 year fixed term. I rang up this morning to see whether anything could be offered in terms of a new deal etc but customer service was appalling and didn't get anywhere!

kingstreet

I'm surprised. NatWest customer retention products are normally pretty good, but that may depend on your loan to value.

I don't know where a Santander five year fix comes on the sourcing report for a remortgage, so I can't say if there's anything better.

jonathan_1983

I will try Natwest again at a later date but I wasn't impressed at all today. Does anybody have any advice/experience regarding the house valuation? Thanks.

kingstreet

Surveyors use comparables.

So, find sales of similar property in the vicinity (0.5 miles) in the last 120 days and see how they will compare with yours.

Use the Land Registry site or other portal which shows sold prices, like this;-

http://www.rightmove.co.uk/house-prices.html/svr/2707;jsessionid=C98048A6318F61FCD0A50C4190B1F0AF

ItsyBitsySpider

kingstreet wrote: »

Surveyors use comparables.

So, find sales of similar property in the vicinity (0.5 miles) in the last 120 days and see how they will compare with yours.

Use the Land Registry site or other portal which shows sold prices, like this;-

http://www.rightmove.co.uk/house-prices.html/svr/2707;jsessionid=C98048A6318F61FCD0A50C4190B1F0AF

Interesting but this raises a question. House sales registered in July would have been agreed in April i.e. three months earlier than exchange. Given that market has considerably changed during last six months, how realistic this comparison would be?

suse*

if you go on right move you can get a couple of local estate agents to come value it for free. I did this when I was trying to guess what I'd get for my house for a remortage just as I knew I was in negative equity but it was just by figuring out by how much. So if you ask them what is the sell it tomorrow price rather than if they house doctor it etc, then maybe knock 10k off that too as they will tell you what you want to hear to get your business and then see how close that is to what you think.