Help! Remortgage advice needed

mel19632

Hi everyone,

We are going to remortgage for the first time in November, however I am having a lot of difficultly working out what mortgage to get.

We have a mortgage broker (who is a friend of my dads) - he is very good at pushing things through and is independant and doesnt charge us any commission!

Our mortgage will be £189,000 (on property worth £210,000) - however I am torn about what deal to take.

I have found a few deals at 5.29% fixed for two years - BUT these come with a 2.5% fee (£4,725!!).

My mortgage broker is saying I shouldn't consider anything with such a high fee, but is saying that the best fixed rate (which is is recommending because of the uncertainty over mortgage rate rises) which he can get is around 5.9%

Money is tight at the moment, as we are working at paying off debts (hopefully DFD December 2008!) , so my theory is to take the low rate now (5.29% + fees) and pay less per month on a higher balance?

Can anyone give me some advice on this?

Thanks!!

herbiesjp

Have you worked out what the mortgage balance will be at the end of the two deals you are comparing?

Leon_W

My guess would be that you would have only just paid the product fee back !

Your choice obviously but without doing the figures, I'd be inclined to side with your broker, as although taking the higher rate your monthly payment will be higher, the outstanding balance at the end of the two years will be lower (thus saving you money overall).

Regards

mel19632

Ok what figures do you need?

We are only paying back interest only at the moment to keep costs down (i know! but we are both in jobs which will pay significantly more within 2-3 years)

For the 5.29% fixed + 2.5% fee the mortgage will be £850

For 5.9% + £999 fee the mortgage will be £934 per month

For us at the moment, the key is trying to keep monthly costs down so that we can repay our debts asap - however I appreciate this is a short sighted view, and i don't want to stich myself up in the long run

Alternatively, there is a BOE - 0.4% rate going, with £999 arrangement fee, but I am not keen as it will only take one interest rate rise to put us above the fixed rate of 5.29%.

Does this makes things any clearer? Thanks for your help so far, I think I really just want to know whether it is better to look long term, bite the bullet and take the higher interest rate, or whether to concentrate on clearing our debts, then worry about repaying our mortgage.

I am 21 also.

Thanks

herbiesjp

By going interest only and looking at the first option, you are increasing your mortgage debt by £4725 though

By going for the second option you are increasing your mortgage debt by £999

SO that is £3726 more over the 2 year period

It costs £84 pm more each month on the second deal - so over 24 months (not sure what the expiry dates are for the fixed rates you have) that would equate to £2016 more in mortgage payments.

Also, when you come to re-mortgage to a repayment mortgage, as you have interest only initially, your mortgage payments will be higher because the mortgage amount will be higher with option 1 due to the added fee, as opposed to option 2 with the lower fee