Tale of 2 mortgage choices: Help needed to decide please.

underwurlde

Hello experts, hopefully someone can help me decide on one of two options I have!

After my recent divorce, our house has just been sold for £314K, after taking into account selling and buying costs etc. I estimate that I will have £86K to put down as a deposit on a new home.

I am looking now to purchase a new home for up to £250K.

OPTION 1).
I can get a HSBC 20 year mortgage for the full amount (£250K-£86K = £164K) on a LIFETIME 1.99% tracker which will cost about £860pcm (repayment + interest).

OPTION 2).
I have an existing 7 year old mortgage which is now at £46K. I have been told that I can transfer it to a new property. This mortgage is very cheap as it is a 0.5% tracker and hence only costs me £230pcm. Therefore I will need a second mortgage to make up the difference of £250K-£86K-£46K = £118K.

The existing mortgage was with the C&G, i.e. Lloyds. Hence the new £118K mortgage will have to be with Lloyds too. However Lloyds do NOT appear to do lifetime trackers and their post 2 year induction interest rate eventually increases to 3.99%

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So, can any clever people help me decide which is the best option to choose or offer any useful insights.

Thank you in advance!

ACG

At the end of the 2 years that 3.99% may be higher or lower. There also may be other deals available which may be more or less than the SVR rate.

The 1.99% is also likely to go up in 2 years, in fact they seem to think rates will start to rise within the next 12 months (although i imagine it will be maybe 0.25-0.5% its not going to jump up overnight).

Thrugelmir

If you obtain the 1.99% tracker rate then take it.

underwurlde

@AVR - indeed the base rate may go up or down (crystal ball anyone?). But in my mind as they are both trackers (one at 1.99% and the other at 3.99%) I guess I can assume that I am comparing like-for-like.

@Thrugelmir - yes I like that offer too! Fixed t'boot and hence no 'mucking about' and no jump in payments after the 2 year sweetener.

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But OVERALL, will taking the old cheap mortgage with me thus making a new mortgage 'cheaper' (by about 30%, i.e. £118K instead of £166K) be enough to offset the higher interest rate of 3.99% compared to 1.99% (over the long term).

Such apparently easy sums confuse my tiny brain!

tigsly

So:
OPTION 1).
HSBC for £164K on a LIFETIME 1.99% = £860pcm

OPTION 2).
Option 2
46K @ 0.5 - £230
and
118K @ 3.99 (for 20 years as per first mortage) = £714

So by sticking to your first 0.5% you will be paying £944 (which is £84 more).. for 2 years.. then of course the second mortage might increase (it might go down.. but who knows)..

Now I'm making the assumption that the HSBC mortgage lets you do any amount of overpayments.. with no penatly - and also you can 'switch with no exit fee...' so - I think its the better offer... if you pay the £84 extra (that you would be paying with the 0.5% mortgage) you will repay 2 years 3 months off your mortgage.. and reduce your intrest payments by around 4K.

If it were me i'd go for the 1.99 tracker.

tigsly

The cheapest lifetime tracker rate i could find was 1.49 ( i want to know when banks were offering lifte time trackers of 0.5% and how I missed them!)

kingstreet

underwurlde wrote: »

@Thrugelmir - yes I like that offer too! Fixed t'boot and hence no 'mucking about' and no jump in payments after the 2 year sweetener

This is a tracker, so presumably it tracks the BoE base rate + 1.44%?

If the BoE base rate rises, your rate will rise by an equivalent amount but will always have 1.44% on top.

A BoE base rate of 5% will see you paying 6.44%.

You have to balance that against something like a five year fix at perhaps 3% where you will be paying more at the outset, but perhaps less in the latter stages where you would be paying more on your tracker with a BoE rate of only 1.75% (3.19% in total).

This comes down to what you want from your mortgage.

TrixA

As someone who's in the process of an HSBC mortgage application, I would not recommend them. They have been exceedingly slow to get to valuation stage, causing us nearly to lose the house. If you want to follow up the progress of your application it takes 40 mins to get through to them on the phone. I was also warned that they have the strictest criteria in the market and turn a lot of people down.

tigsly

I too have an HSBC mortgage my application took forever too.. they were claiming that 'the demand for product was high'.. they made errors in my application.. It seemed to take forever... I wanted the rate though so stuck it out (also my sale was taking longer because my vendor was being useless... and there was a probate property involved..) -although I did have to chase ALOT and they rarely rang me back when they said they would.. They even took money off me to book a mortgage - but then said there was no mortgage application to match the booking fee.. and eventually agreed to waive the fee on the new product?!

I put in a complaint to them (due to them offering me a booking fee at a rate in a letter on the day they removed the rate.. so I could never have booked the product at the rate they offered.. which they later 'keyed in for me'.. the mortgage has been agreed at original booking fee.. (I'm assumign they cant recind on this - we are exchange..) BUT yesterday I got a letter stating they were still looking into my complaint?! Which I assumed had been resolved!

SO if you are looking for 'quick' - HSBC are not the best.. but there rate appeared to be the best 'lifetime fix' on the market..

I remortgaged with them about 3 years ago - and remortgaging was far easier - than the 'moving' product we have currently agreed.. I do wonder if the process of getting the mortgage has got harder tho - as I was asked alot about extra spending - detailing shopping, phone bills, ect ect.. which I suspect may slow the whole process down! Also the amount I was offfered was far higher than the amount i got offered this time - even tho both myself and my OH work and earn more now than we did then!?

kingstreet

kingstreet wrote: »

This is a tracker, so presumably it tracks the BoE base rate + 1.44%?

If the BoE base rate rises, your rate will rise by an equivalent amount but will always have 1.44% on top.

A BoE base rate of 5% will see you paying 6.44%.

You have to balance that against something like a five year fix at perhaps 3% where you will be paying more at the outset, but perhaps less in the latter stages where you would be paying more on your tracker with a BoE rate of only 1.75% (3.19% in total).

This comes down to what you want from your mortgage.

Sorry, it's 1.99%, so it would be 1.49% on top of BoE, not 1.44%.

Sorry for the mis-read.

underwurlde

tigsly wrote: »

The cheapest lifetime tracker rate i could find was 1.49 ( i want to know when banks were offering lifte time trackers of 0.5% and how I missed them!)

Heh! 'Back in the day' & FWIW, I took out 'that' original (re)mortgage mentioned above with C&G on the 31st October 2007 for £56,000ish. It was 0.04% over base for the first 2 years after which it went to and has remained at 0.5% over base. In other words they simply 'gave' me their money. God knows why, but I certainly wasn't going to argue with that offer!

@tigsly, @TrixA: Thank-you for the heads up on HSBC's incompetence. Such things seem to be par for the course nowadays. My GF banks with them - they are AMAZINGLY quick to charge £50 for being 1p over-drawn though

@kingstreet Thank you for your informative words. Backs up what I know of mortgages. This is not my first mortgage (This will be my 4th house purchase in 20 years and probably my 6th or 7th mortgage / remortgage application) and I am fully aware of all the in's and out's of trackers / fixed rate / repayment / interest only etc. etc. I have always gone the tracker route and have yet (over 20 years) to regret that decision. More luck than judgement of course.

I also have a good Financial Adviser so a shout must go out to my friend John Knott of Atkins Bland IFA of Ferndown, Dorset. Before any of you ask "why not ask your FA this question?" - I have! But a second opinion is always worth seeking.

Thank you all for taking the time to answer my thread for what is a very important decision. I think my mind is 90% made up though: the [obvious] answer I think is to Keep It Simple (Stupid) and go with HSBC... providing they don't start ar$ing around of course!:D

Andy & Sue