Help with remortgaging

cpt_pat

Hi all,

Im coming up to the end of my fixed term with woolwich and so would like some advice on what might be the best option for me to go ahead with. the value of the property is ~250K with a 175K mortgage 33 years left (70% LTV). If I change to a different lender i need to pay £285 completion fee so I decided to contact woolwich and see what they can offer, the advantage here is that they "in general" take my word on the value of the property(Im pretty sure it is over £250K in value any way) so i can go for rates at 70% LTV plus I don't need to pay the completion fee or any valuation fees for a new lender.

Here are the rates they offered:-

2 year fixed 2.39%, £641 monthly repayment
5 year fixed 3.2%, £718 monthly repayment
5 year fixed at 2.89% £1000 fee, £692 repayment (fee added to loan)


Im not sure which deal would be better for us, as with recent news reports on the 'recovering economy' the interest rate might go up?

has anybody got any advice?

Which ever option i take i was going to keep my monthly payments the same as now which is £775 hence would be overpaying by a small amount.

I have contacted a broker too so he shall be giving me a few quote.


thanks for all your help and advice.

Foxy-Stoat_3

If you take option 3 over option 2 you will save £560 over 5 years ( £9.33 per month ) but you need to pay £1000 up front for the privilege, assuming you don't add the £1000 to the mortgage, which will zero any savings. Paying £1000 to save £9.33 a month doesn't make sense to me as you will be over paying any way, so your over payment will be £9.33 extra.

It would be better to pay the £1000 into the mortgage and keep it fixed for 5 years at 3.2%....unless you want to take the risk of a 2 year deal...

Taking the 2 year deal and assuming ( best case ) the rates do not go up for the next 5 years then you will save £4060 in the 5 years ( £67.67 a month ). Again as you will be over paying, you will over pay an extra £77 for the first 2 years then £67 for the 3 years after that but you will have uncertainty and the risk of the rates going up......very much doubt your rate will go down much.

You need to work out how much your mortgage will increase if the rates went up by 1% on year 3...if the answer is more than £67.67 then I would fix it for 5 years at 3.2%....that rate is pretty good any way.

Not sure how much you save in interest by over paying, I am sure there's a calculator on the inter-web somewhere, so you could work out the possible savings vs risk.

cpt_pat

hi Foxy-Stoat,

thanks for your reply. will have a play around with the numbers and post it up here. MSE has got a range of calculators to use so it should not be too difficult i hope.

i have an inclination to go for the 2 year fixed, but ill crunch the numbers first and see how it goes.

Foxy-Stoat_3

I guess you can always do another fixed deal in two years, but noone will be able to predict what will happen to interest rates.

dimbo61

You should consider the 5 year fix it you need long term security!

cpt_pat

ok I have tired to do some calculations on the different options on the 5 year fix deal and have detailed these below. In each instance I have included an overpayment to make the total MP (Monthly payment) up to £776 which is what i pay currently.

*3.29% no fee
MP £718 £776 (£58 over payment)
0 175,514 175,514
1 172,467 171,759
2 169,322 167,883
3 166,074 163,880
4 162,721 159,747
5 159,259 155,481

*2.89% +1K fee added to mortgage
MP £692 £776 (£84 over payment)
0 176,514 176,514
1 173,268 172,244
2 169,926 167,848
3 166,487 163,324
4 162,947 158,667
5 159,303 153,874

3.2% pay 1k off capital
MP £714 £776(£62 over payment)
0 174,514 174,514
1 171,485 170,728
2 168,357 166,819
3 165,128 162,782
4 161,794 158,615
5 158,352 154,313


from these sums it seems the 2.89% + 1K added to the loan is the best option, in that after 5 years i would have paid off the most off the capital (based on my overpayments). Im quite surprised by this to be fair, so if anyone could jut check my logic to make sure i have not done anything stupid here. i have used the MSE overpayment calculator for the sums.

I shall post a similar analysis for the 2 year fix but different rates for years 3,4,5 so we can make a fair comparison.

sorry for the really long message!!

cpt_pat

I have now done the sums for the 2 year fix @ 2.39% with the different interest rates for years 3,4,5. where the MP is less than my 776 I will calculated it with a overpayment to make it up to £776.


*2.39% fixed 2 years then 3.39 for 3 years
MP £641 £776 (135 overpayment)
0 175,514 175,514
1 171,976 170,335
2 168,353 165,031

MP £717 £776 (59 overpayment)
3 161,969 161,248
4 158,802 157,335
5 155,526 153,288


*2.39% fixed 2 years then 3.89 for 3 years
MP £641 £776 (135 overpayment)
0 175,514 175,514
1 171,976 170,335
2 168,353 165,031

MP £764 £776(£12 overpayment)
3 162,230 162,083
4 159,318 159,018
5 156,291 155,832


*2.39% fixed 2 years then 4.39 for 3 years
MP £641 £776 (135 overpayment)
0 175,514 175,514
1 171,976 170,335
2 168,353 165,031

MP £813
3 162,473
4 159,801
5 157,008

*2.39% fixed 2 years then 4.89 for 3 years
MP £641 £776 (135 overpayment)
0 175,514 175,514
1 171,976 170,335
2 168,353 165,031

MP £840
3 162,970
4 160,806
5 158,534


Based on this again it seems the 5 year fixed at 2.89% + 1k fee added to the loan seems the best deal in terms of the the amount of capital i will pay off after 5 years. Im not sure if this is the best way to work out the best deal, so any help would be much appreciated.


cheers
M