Remortgaging preliminary thoughts

Bean123

Hi all,

I was on here about 15 months ago thinking about whether to come out of my NWide fix early, and decided not to do so after all the discussions about it.

I'll put my couple of questions in a following post, but wanted to set out the figures I've got from the calculators on here for my own reference in future.

My 4-year fix at 4.84% ends at the end of March 2014 so I'm starting to think about my options.

Probably aiming for a longish fix as there's no realistic prospect of salary increases above 1% for the foreseeable future.

Amount owing will be £101K. LTV < 50%. If I just continued with the existing remainder of term, that would be 21 years. However I'm thinking of reducing it to 17 years so it's paid off by the time I'm 60 (43 now) if no overpayments.

I'm happy to overpay up to a total of about £1200 outlay (i.e. including standard monthly payment) as that's what I'm paying now. Would probably not add fees to mortgage as don't see the point in paying interest on it and have the cash available.

The figures from the calculators on here give the amount owing at the end of various fixed rate terms [17 year duration of mortgage itself] a) with no o/p; b) with o/p taking monthly payment up to apx £1200, as follows:

Retention products with NWide:

Standard:
5 yr fix @ 2.89%, £900 fee. a) £76,245; b) £39,410
5 yr fix @ 3.09%, no fee. a) £76,572; b) £40,194

Flexclusive (if I have a flexdirect/flexplus/flexaccount, which I don't at present, though could happily take out a flexdirect account):
4 yr fix @ 2.49, £900 fee. a) £80,925; b) £51,117
4 yr fix @ 2.79, no fee. a) £81, 347; b) £51,862

SVR for all = 3.99% (this is what I'll revert to now anyway).

Other lenders' products (e.g. N&P; FD) – need to add £90 NW end of product fee:

N&P 5 yr fix @ 2.84%, £295 fee; free legals etc. a) £76,164; b) £39,053
N&P 10 yr fix @ 3.84%, no fee; free legals etc. a) £49,644 [£77,776 after 5 yrs]; b) paid off after 8 years 2 months

SVR = 4.99%

FD 5 yr fix @ 2.99, £499 fee (would need to move curr a/c & pay valuation). a) £76,409; b) £39,478
FD 5 yr fix @ 3.29, no fee (would need to move curr a/c & pay valuation).a) £76,896; b) £40,982

SVR = 3.69%

Bean123

I'm thinking that on these current products, it's probably best to stay with NWide, take out a flexdirect account to become eligible for the flexclusive products, and overpay as suggested to £1200.

It would be the lower rate product @ 2.49%, although that is only for 4 years not 5.

With the overpayment as outlined, the SVR becomes important in case it's not financially worthwhile remortgaging at the end of the product - so N&P is out for that reason. The FD figures don't seem good enough to make it worth my hassle changing from Lloyds current accounts (3x Vantage).

I'm just a higher rate taxpayer, so although the mortgage rate is low, and I could almost certainly get better returns on S&S ISAs, if I continued repaying at the same rate then I'd be mortgage free by my early 50s and could then put more into equities. I have a final salary pension so equities are a bonus.

Open to comments, though. There's almost certainly a flaw in these preliminary thoughts.

One other question: I know it's a bit of a crystal ball question, but as a general rule in the past, has there ever been a trend for lenders to release lots of improved products in the new year? (i.e. considering timing of applying to reserve a product - or wait and see).

Bean123

Sorry, realise that's an impenetrable couple of wodges of text.

Basically, I'm wondering whether there's anything particularly wrong with an approach of staying with N'Wide at the end of my fix, taking out a flexdirect account to make me eligible for the flexclusive 4 yr fix @ 2.49%, and overpaying significantly during the fix?

kingstreet

Not a clue.

What you are proposing is "direct only" so you are reliant on others who have done the same, or you're "guinea-pigging" for everyone else...

Thrugelmir

What SVR do you default onto next March?

Personally I wouldn't base long term decisions on S&S ISA's outperforming mortgage interest rates. These are exceptional times. So there are bound to be unexpected consequences of the monetary policy we are witnessing.

Imma_Number

Bean123 wrote: »

Hi all,

N&P 10 yr fix @ 3.84%, no fee; free legals etc. a) £49,644 [£77,776 after 5 yrs]; b) paid off after 8 years 2 months

SVR = 4.99%

http://www.nandp.co.uk/mortgages/types-of-mortgage/fixed-mortgage/10-year-fixed-rate-75i-201113/

You can only overpay up to 10% of the outstanding balance without incurring the Early Repayment Charge. So with the N&P one above the repayments are £675 pcm and the remainder £525 * 12 = £6300 which is more than 10% by year 4

This may be the case to some extent with the others too just that the 10yr one stood out to me.

Bean123

Thrugelmir wrote: »

What SVR do you default onto next March?

Personally I wouldn't base long term decisions on S&S ISA's outperforming mortgage interest rates. These are exceptional times. So there are bound to be unexpected consequences of the monetary policy we are witnessing.

From 4.84% fix to 3.99% SVR.

Could you explain your thinking in your second para, please, Thrugelmir? I'm not entirely sure I'm clear what you mean.

Bean123

Imma_Number wrote: »

http://www.nandp.co.uk/mortgages/types-of-mortgage/fixed-mortgage/10-year-fixed-rate-75i-201113/

You can only overpay up to 10% of the outstanding balance without incurring the Early Repayment Charge. So with the N&P one above the repayments are £675 pcm and the remainder £525 * 12 = £6300 which is more than 10% by year 4

This may be the case to some extent with the others too just that the 10yr one stood out to me.

Thanks - hadn't spotted that. With N'Wide it seems to say you can overpay by 10% of the original loan, not the outstanding balance.

Thrugelmir

Bean123 wrote: »

Could you explain your thinking in your second para, please, Thrugelmir? I'm not entirely sure I'm clear what you mean.

Recent increases in share prices may belie the actual underlying trading performances of individual companies. More profit warnings were issued in September than any month since 2008. So expecting sizable increases in price levels could possibly well disappoint.

Bean123

OK, so better a bird in the hand (overpaying) than in the bush (presuming that I would definitely get better returns on S&S ISA).

Thanks.

kingstreet

Bean123 wrote: »

Thanks - hadn't spotted that. With N'Wide it seems to say you can overpay by 10% of the original loan, not the outstanding balance.

That's on new Nationwide mortgages.

Old ones are still limited to £500 per month.

Check your situation if you do change.