Stick and renegotiate or switch lender?

blameyourelf

Hi all,

My circumstances have changed recently and I've found myself in a position where I have a number of options, and difficulty deciding which might be best. Was hoping for some pointers if possible? As briefly as possible - the situation is this:

Have had a Scottish Widows professional mortgage for the last 5 years or so, currently on 3.99% SVR. There is little equity in the property (was a 102% mortgage to start with, and despite paying off and living in an area which has been affected by the crash to a lesser extent than most, the current value about £5000 above the remaining loan amount).

Also, it is a joint mortgage but I have recently split with my partner, and we have agreed that I will buy her out and move in on my own.

I now need to get her name removed from the mortgage. My salary is sufficient that SW don't have a problem with this in principle (no bad credit etc), and I have filled in the new mortgage application form which they sent me. I was about to send this off - along with a cheque for about £190 to have the names changed, and then will need to pay several hundred more to a solicitor to have the deeds changed I believe.

I do, however, have enough saved to allow a 15%, possibly at a stretch 20% (although this would remove my safety net) deposit. I've had a look around and there are a number of 2 year fixed mortgages available (post office, HSBC etc), with rate of 3-3.69%, some even % (usually with arrangement fees of 900-1500).

I'd like to bring my monthly payments down apart from anything else so think I should use my savings to do this (currently the savings are mainly in offset with some in current account...). Do you think I should stick with SW and try to renegotiate a fixed rate with more deposit (anyone know if they are likely to allow this?), or pursue one of the probably slightly lower interest rate deals available with other lenders given that I'll need to pay fees to SW anyway?

Also, if I do go with another lender, can I forget about my ex-partner's name being removed from SW books, or would I need to do that anyway as a separate matter?

Many thanks in advance!

ethank

How are going to reduce your mortgage payment, and buy your former partner out, and increase your equity? Sounds like a tall order, I do not envy you!

blameyourelf

The lack of significant equity in the property has meant that the amount needed to buy out is relatively small, so I hope that I'll have sufficient savings for the 15% deposit amount - which I'm hoping will allow me to get a better interest rate?

Yorkie1

Unless there are particular reasons for not wanting a longer fix, I'd be considering a longer fix than 2 years. It won't be long before you have to go through the whole process of a new product (with associated product costs and, if moving lender, possible exit / legal / valuation fees too).

If you can pay off more equity and still leave yourself a rainy day fund of at least 3 months' outgoings, then I'd consider doing so while interest rates are low.

blameyourelf

Good point, I guess short term thinking is not necessarily a good idea in this situation. I have a three year contract in my current location, but after that point it is fairly likely that I will move elsewhere, perhaps looking to sell this place and move up the ladder. So I guess a three year fixed deal would probably be as long as I'd want to take out on that basis, although the rates are obviously slightly less favourable.

I suppose I could try a 5 year deal and plan to rent out if/when I do move away, but doesn't look like that would help with bringing down my monthly payments based on the amount of deposit I have at my disposal to put into a new mortgage at the moment.

egoode

It doesn't hurt to look around at other options before commiting to a fix with SW however I would suggest rather than actually reducing your monthly payments keeping them the same as what you are paying and the overpayments will help you build up more equity in your property.