Mortgage Renewal via a Broker

fiisch

Forgive me, as my knowledge of mortgages is not particularly strong, and this is the first time I've had to renew.

The Story So Far
My girlfriend and I bought a flat in April 2012 on the First Buy Scheme (5% deposit, 20% equity loan, 75% mortgage). We used Mortgages First to arrange the mortgage, who provided an excellent service. We have a fixed rate of around 3.8%, and pay just under £600 / month on a 35 year deal with just under £134k remaining. We are currently with the Halifax who I am also delighted with (excellent customer service, so much so that we have subsequently switched all banking/credit cards to them also).

The Offer
Mortgages First have contacted me to offer renewing the mortgage early with effect from 1st January 2014. They have advised it would be with the existing supplier, and would be a fixed rate of 2.64% and would reduce our payments to £507 / month. We can also reduce the length of the mortgage e.g.: 25 years would be £620 / month.

To arrange this, Mortgages First have requested a £195 fee.

The Future
My girlfriend and I are considering a house on a newly built development, so may look to move in the next 12 - 18 months. However, we are also hoping to get married after 6 years of living in sin, so we will have, in the near future, expensive wedding costs to pay.

The Question
1. The pitch did sound like a tacky sales pitch, and with it catching me early unawares I'm wondering if I'm being had. Do the rates sound reasonable, and would one normally expect to pay a fee when renewing the mortgage?

2. Is renewing early an option if I contact lender/other lenders direct, or is this an offe4r which is likely to be exclusively via the broker?

3. I like the idea of reducing the term at this early stage, which ultimately reduces the interest payments, but with impending costs the idea of reducing monthly payments by nearly £100 is very attractive. How hard should I try to reduce the mortgage term i.e.: how much of a benefit will I feel in the long run?

Many Thanks.

dunstonh

My girlfriend and I are considering a house on a newly built development, so may look to move in the next 12 - 18 months. However, we are also hoping to get married after 6 years of living in sin, so we will have, in the near future, expensive wedding costs to pay.

In which case you need to be wary of going with a deal that ties you in.

1. The pitch did sound like a tacky sales pitch, and with it catching me early unawares I'm wondering if I'm being had. Do the rates sound reasonable, and would one normally expect to pay a fee when renewing the mortgage?

We cannot comment on whether it was tacky or not. We were not there. However, new deals do normally have new fees. Both at lender level and at broker level.

2. Is renewing early an option if I contact lender/other lenders direct, or is this an offe4r which is likely to be exclusively via the broker?

you are not renewing. Your current deal comes to an end. You are choosing to buy a new deal. Deals can vary with brokers and direct options.

3. I like the idea of reducing the term at this early stage, which ultimately reduces the interest payments, but with impending costs the idea of reducing monthly payments by nearly £100 is very attractive. How hard should I try to reduce the mortgage term i.e.: how much of a benefit will I feel in the long run

no need to be in any hurry. Interest rates are low and inflation is eroding the mortgage balance as well. You can always choose to overpay a small amount periodically if you have the savings available to do it. You have to balance all stages all life in your current spending. Now, short term (possible new house, marriage), medium term (children and lifestyle spending) and long term (retirement provision). If you leave any of those things short, you end up paying or suffering later. The key is to have balance in all areas.

Keekles

1. It is, and it isn't, in the same breath. You may find that Halifax have an offer in which they're attempting to retain their current business as remortgaging often means switching lenders. It would be improper of the broker to advise you to remortgage within the initial period due to ERCs, but in this instance it would appear that they're able to due to the lender.

2. Sort of answered this above! Most likely exclusive to Halifax, potentially the broker.

3. The shorter the term, the less interest you're likely to pay (accrue). The biggest benefit is having your mortgage paid off in a shorter term and therefore having less to fork out for the older you get!

kingstreet

Remortgaging to another lender with an equity loan in place is likely to be difficult, if not impossible.

You can do a product transfer direct with Halifax, or via the broker. The deals may be different. This broker charges a fee, some don't. The typical commission from a Halifax PT if under 75% is .3% and it requires signatures on one form, no supporting documentation and no formal application.

If planning to move, I'd consider staying on the variable rate for the time being, as you don't know if a different lender will have a better offer at that time.

fiisch

Many thanks all for the replies.

This may be a bit of a dumb question, but if we move during a fixed deal, do we have to pay early settlement/early termination fees to the lender before moving?

Is it usual for people to buy a new deal before the expiry of their current one?

It appears on the face of it a very good deal. As this new deal is also for 2 years. The only potential snag is the move on the horizon, but we may well be waiting 2 years+ before we can afford to be in a house...

I will contact the lender tonight, but if Halifax direct are unable to offer a better deal, I'll be inclined to renew on previous service offered and the answers above. The variable rate with Halifax is currently 3.99%, so would be over £100 / month than the fixed rate.

When we bought this property, Natwest, Nationwide and Halifax were the only lenders participating in this particular scheme.

How did people manage before the days of the Interweb and MSE?!?!

kingstreet

If you move house during a fix, you arrange your new mortgage with the same lender and port the current rate to it, otherwise you would have an early repayment penalty to pay.

FWIW neither Nationwide, nor NatWest accept shared equity remortgage business.

ACG

1. The pitch did sound like a tacky sales pitch, and with it catching me early unawares I'm wondering if I'm being had. Do the rates sound reasonable, and would one normally expect to pay a fee when renewing the mortgage?

The rates do not sound bad, it doesnt make sense for a broker to offer you a deal that is not the best they can offer, otherwise you may find that better deal elsewhere and they have to get it past compliance so if there is a better deal there needs to be a good reason for them not to choose it.

As for the brokers fee, this depends on the broker and how much they value their time. Personally i decide on a case by case basis - if the commission is enough then i would not charge a fee. If the commission is not enough, then i would.

2. Is renewing early an option if I contact lender/other lenders direct, or is this an offe4r which is likely to be exclusively via the broker?

It is usually available if you stick with the same lender. If your moving lender then you would probably need to pay ERCs.

3. I like the idea of reducing the term at this early stage, which ultimately reduces the interest payments, but with impending costs the idea of reducing monthly payments by nearly £100 is very attractive. How hard should I try to reduce the mortgage term i.e.: how much of a benefit will I feel in the long run?

In the long run you could find you are paying off your mortgage a few years early - potentially retire a few years earlier?
Whilst interest rates are low, i would be making the most of it, but if you have a large expense coming up that may not be feasible. You could potentially keep the term the same and make overpayments... but loads of people say they will do that but then never do as this crops up or that crops up etc.

fiisch

Thanks AGC.

In case anyone is in the same boat, I spoke with Halifax and they're currently waiving early payment fees if you renew with them and are in the last 3 months of the deal.

What turns me off the broker is this notion that I have to do it right now or I'll miss out. I like to take my time and understand what I'm signing up to....

ACG

No problem.

I dont blame you, the poor thing is that they seem to have decided what product you were going on to before even speaking to you. They're supposed to be checking your circumstances, doing the research and THEN making their recommendation.

Assuming they have not had a chat with you to check your circumstances/done an updated fact find then i would steer clear it sounds like they're doing it back to front - sell the product then make it fit.

Wh05apk

As you have said, Halifax will allow a rate switch 3 months before the end of your deal, so potentially a good move for you, paperwork wise it is relatively simple transaction for a broker, I suspect you could arrange the same deal by phone with Halifax, so could use that as a bargaining point to get your broker to waive their fee?