Remortgage Advice

wackyraces

I currently have my mortgage with Northern Rock, which was a 2 year fixed deal. This ends on the 30 November 2004. I currently owe £46K on the mortgage and have 13 years 5 months of repayments left. I contacted Northern Rock about changing the product of which, they have many options. They have a 3 year discount product, which is (SVR -1.50%) or a 3 year capped discount (SVR -1.45%) or a 3 year fixed at 5.59% all of which would cost me £195 to change.

For me to move my mortgage to another company, it would cost me £700 in penalties. Which I could afford to pay.

Anybody have any advice as to what to do or product option to look / take, with any company. I've read so much about remortgaging, that I've now confused myself. Any help would be much appreciated.

:-/

Mortgageman

OK,

Northern Rock often have extended penalties (where the penalties last longer than the scheme) and that appears to have been the case here. The £700 penalty - do you know how long you will have to pay this for (there will be a time where you can move to another lender penalty free)

If you decide to stay with NR, make sure the product you get does not have extended pens

Once we know when your penalty expires, it's a simple question of crunching the numbers.

MM

wackyraces

I would be quite happy to add that penalty to the mortgage, if there was a good deal and to get away from Northern Rock. If the mortgage was flexible, I could overpay and get rid of the penalty quite quickly.

Mortgageman

But, if your penalty expired in say 1 month, then it would be silly to move for a month.

Cash flow (monthly outgoings) wise, it will be better to move to another lender.

Overall, it may be better to stay.

I'm probably not being clear:

Penalty - £700.
Penalty expires in 12 months time
By moving to different rate you save £50 a month
Total saving = £600, but total cost = £700, so although you are £50 a month better off, you lose out by £100 overall.

Does this make more sense?
If you want to move for monthly cashflow purposes, then of course you can, and providing you have sufficent equity you can arr the penalty to the loan 9although of course you will pay interest on it). Whether it is the best thing to do will depend on how long it is until the pens expire.

MM

(all the figures above are just indicative)

wackyraces

Thanks for the reply. On checking with Northern Rock, I have another 12 months to go before the penalty expires, due to taking the help with costs option on my current product deal. I have been told that if I now choose a 3 year product deal with them, then I can yet again get help with costs and when the 3 years are up, have no penalties. The cost to move to another product with Northern Rock, is £945 with £750 help with costs option.

So do I take the hit with the £700 and move or take another 3 year deal with them? Their rates don't seem to compete against other companies.

Mortgageman

So, options are

1) Move to a different lender - just throwing numbers aound here, but on 3 year tracker scheme looking at around 4.78% (free val, refunded legals £299 app fee) - this would give you payments of around £395.94. you would have to pay a £700 penalty - Total cost £15,253 (there may also be other leaving fees)

2) Move to different N Rock scheme cost you £195 to move, and payments will be in the region of £415 - total cost = £15,135

3) Stay on SVR until the pens run out and then move to a cheaper deal.

All the calculations above are basic (I used whole years, for example). Make sure if you take another product with Northern Rock that the help with costs does not over extend the scheme.

I can't give advice here, but the above should give you the methodology to making the decision. Alternatively, you can speak to a broker, who should be able to talk you through your options.

MM

wackyraces

Thanks for the replys MortgageMan. I shall have to think about the options but it looks like another term with Northern Rock.

wackyraces

After speaking with Northern Rock further, I now have this information. If I leave my current product on 2/12/04 then I will have to pay fees of £725. If I move my mortgage on 26/02/05, then I will have to pay fees of £475. The question is should I just wait until 26/02/05 and then move the mortgage. This means I will be on the SVR. I'm tempted to move the mortgage on the 2/12/04 and take th hit on the £725 just to get away from Northern Rock. Any advice?