End of Fixed term rate - what to do next

amazelucy

Good morning,






I wondered if anyone could offer some advice?


We are coming to the end of our 5 year fixed rate with Natwest - we were 1st time buyers at the time and had a 5.99% fixed rate for 5 years on a 30 year term (we wanted it to be as affordable as possible as we were earning a fair bit less than we do now).


The house was £145,000 and the mortgage was 90% LTV.


Now we think the house is worth at least £175,000 and the mortgage left to pay is about £122,000.


Natwest say that we need to get a valuation done - which we have to pay about £250 for - but I don't know if that will be worth it - will it make much difference in choosing a new product? Will that valuation still count if we decide to go with another lender instead of Natwest?


We really want to reduce the mortgage term down to minimum of 20 years too - ideally 15 years. Is that easy to do?


Sorry for all the questions, but any advice would be much appreciated


Thanks


Lucy x

ChopperST

Have Natwest offered you a new deal?

Use that as a bench mark to shop around. Using Nationwide's house price index your house would be valued at around £172k so you're not too far off. You are at 71% LTV now so look for 75% mortgages on the search engines as well to see what rates you can get and compare including the costs of fees and valuations etc.

You don't have to necessarily reduce the length of your mortgage formally. Most mortgages do allow you to overpay 10% the balance per year which if you are disciplined you could do rather than remortgaging and shortening the term which would likely attract an arrangement fee.

If you are struggling yourself engage a local broker under recommendation from family / friends.

amazelucy

Thank you that's really helpful.


NatWest have written to us to say that the 5 year fixed rate will be ending on the 30th June and we can either allow it to go to the variable rate, or choose a new product.


But, looking online I think the current LTV based on the last valuation (which is for 145,000 when we bought the house) and having 122,000 left to pay means it will be based on 85%.


That's really interesting about the index - I didn't know that existed! I'm hoping it will be above the 175,000 as 2 on the same street have sold for 180,000 and aren't as nice as ours!! But I don't know how they decide!


But if it is 70% or 75% LTV will that make much difference on the interest rate? I'm just trying to work out if it is worth paying £250 for a survey?


Do you know if we changed to a new company - would we have to go through a whole new application process etc?


Over paying sounds like a really good idea - do you just do a higher direct debit each month? Do you know roughly how many years it could take off?


I'm so sorry for all the questions, and really grateful for any help x

ChopperST

Bear in mind I'm not a mortgage advisor just someone who has bought / sold / remortgaged a few times!

You can choose a retention product with Natwest which usually wont involve a fee as they already have all your details and 5 years previous with them of you paying them on time so they will want to retain your business. You could also remortgage with a new lender which yes is the same as buying the house all over again, there will be credit checks, production of bank statements etc. and there will be a fee for all that work.

Natwest may just do an index valuation sometimes known as a desktop valuation, a drive-by valuation where a valuer does a VERY basic valuation of your house or a physical valuation (which usually you have to pay for) - as its 5 years since your house was last valued it may be worth your while to get that done to access lower LTV products.

Overpayments are really simple - your mortgage provider will give you their bank account and sort code details and you can send them money whenever to overpay your mortgage by standing order or faster payment but make sure you check this is applicable to any new product you sign up for before you do it to avoid being hit with hefty repayment charges, most mortgages now allow 10% per annum of the balance. We took our latest house over a 35 year term anticipating my wife being off for maternity leave at some point but we overpay the equivalent each month to make it a 25 year term as we know we are disciplined and wont spend the money on anything else.

No offence but you seem quite naive in these matters - in such a case it probably is worth sitting down with a good mortgage advisor and looking at what they suggest to avoid making the wrong decision. I'd get on moneysupermarket etc. and speak to Natwest to gets some rough ideas and see if a broker can get you a better deal.

GL.

amazelucy

Thank you, honestly no offence taken - I am the first to admit that I know practically nothing about the whole house buying/mortgage world - and I find it really confusing (and boring lol) so have kept my head stuck in the sand - and believe it or not I'm very bright in most things - god knows how stupid people manage to sort them out


I will definitely speak to a mortgage advisor (the NatWest "help"line were definitely no help at all!) and that's the thing about coming on here - just want some basic understanding so I can have a worthwhile discussion with an advisor - otherwise I'll just get more confused!


They did do a desktop valuation for me - that put it at £155k, so didn't really make a difference. I think I'm going to pay the money to get a valuation done - at least that way we will know where to start - and it looks like if I can get a rate based on 70% LTV then I can do a 20 year term and still be at least £70 a month better off from what we pay now - and I can use that to overpay.


I would like to stay with NatWest really - they have always been really good and all our banking is through them, so as long as the valuation is OK I will stay with them I guess!


One last question (sorry!!) but with the overpayment - is it 10% of the value of the mortgage or the monthly payment? Only as my little boy will start school and we will be saving over £750 a month on his childcare so that will become "spare" money so would like to overpay as much as possible!


Thank you very much for your help x

ChopperST

You've shown the intelligence to ask the question in the first place which is all that matters.

Generally it is 10% of the mortgage advance or balance you will have to check with Natwest which theirs is.

I really would speak with a mortgage advisor to get you the best deal.

Moneysupermarket suggests a £122k mortgage on a £175k house would cost you around £610 a month on a 20 year deal so use that as a starting point.

kidmugsy

amazelucy wrote: »

if I can get a rate based on 70% LTV then I can do a 20 year term

It's probably better not to shorten the term to twenty years - it reduces your ability to cope with unpleasant financial surprises. It's usually better to get as long a term as you economically can, and then overpay when you are comfortable with doing so. (Best of all, some mortgages let you later borrow back any overpayments if you need to - remember to ask your mortgage broker/advisor about this.)

Overpayments are, I understand, usually based on a percentage of the outstanding loan (up to 10% commonly) . So if your outstanding loan were £120k, you could overpay by up to £12k per annum.

N.B. I've no experience of this: our last mortgage was "flexible" so that we could pay back whatever we fancied whenever we fancied.

VT82

I wouldn't pay for a survey/valuation now. If it is shown you can get the best deal for you (with Natwest), by having their valuation done, then that's the time to pay for one.

Unfortunately, it's not like you can pay for 'a valuation', and just go and use it for applying to any of the lenders. Any lender that you go to will want to have their own valuation undertaken, and may charge you for it.

Or at least that's AFAIK anyway.

amazelucy

ChopperST wrote: »

You've shown the intelligence to ask the question in the first place which is all that matters.

Generally it is 10% of the mortgage advance or balance you will have to check with Natwest which theirs is.

I really would speak with a mortgage advisor to get you the best deal.

Moneysupermarket suggests a £122k mortgage on a £175k house would cost you around £610 a month on a 20 year deal so use that as a starting point.

Thank you for all your help. We pay £780 a month at the moment, so £610 sounds great - and will keep paying at least £780 so we will be overpaying and then more when our little boy goes to school. I've managed to track down our mortgage advisor who we bought the house through 5 years ago and he was fab - so we will book to see him again

amazelucy

kidmugsy wrote: »

It's probably better not to shorten the term to twenty years - it reduces your ability to cope with unpleasant financial surprises. It's usually better to get as long a term as you economically can, and then overpay when you are comfortable with doing so. (Best of all, some mortgages let you later borrow back any overpayments if you need to - remember to ask your mortgage broker/advisor about this.)

Overpayments are, I understand, usually based on a percentage of the outstanding loan (up to 10% commonly) . So if your outstanding loan were £120k, you could overpay by up to £12k per annum.

N.B. I've no experience of this: our last mortgage was "flexible" so that we could pay back whatever we fancied whenever we fancied.

I had never thought of it that way - that's really helpful thank you, and everyone's help will definitely help me have a really informed discussion with the mortgage advisor we will see - so thank you. I've looked and it does say 10% for ours so that's great, although we won't be able to pay that much.


Any ideas how much overpaying can reduce your overall mortgage amount by - is there any sort of calculator thing you can use? Would just be nice to have something to aim for!

amazelucy

VT82 wrote: »

I wouldn't pay for a survey/valuation now. If it is shown you can get the best deal for you (with Natwest), by having their valuation done, then that's the time to pay for one.

Unfortunately, it's not like you can pay for 'a valuation', and just go and use it for applying to any of the lenders. Any lender that you go to will want to have their own valuation undertaken, and may charge you for it.

Or at least that's AFAIK anyway.

Thank you, that is helpful to know - I wasn't sure if a valuation through NatWest would count for another lender - so that answers that question.


I don't think Natwest is the very best deal looking around.... and I know this sounds ridiculous, but, I do really want to stay with Natwest if possible. We do all our banking with them and they've been so good over the years.... and I just don't want the hassle of doing a whole new application etc - especially now they've tightened the rules.... working more than full time with a busy job and a toddler is enough!!


Of course if the advisor can find us something really good that will save a fair amount I will consider, but if it only saves a little bit I'd rather not have the hassle!


From my calculations if it was valued at the value we think (or even a bit less) it would reduce the LTV enough to save about £60 a month on the new deal.... so not loads, but over 5 years would obviously save loads more than the cost of the valuation