Confusion, Tied into Fix and Arrrrrgh!

rachelandgromit

I'm really confused. I own a property and have been tied into a fix for 10 years at 5.99%. This fix is up in June 2018 and there is currently £35k remaining. There are penalty fees of around £7K to leave this mortgage but it can be ported over. My property is on the market for £185k.

I want to be somewhere with my partner who is living with me and sold their property some time ago. The mortgage company have advised that to port my mortgage over we need to do a transfer of equity and then apply for additional borrowing/new mortgage. The property we have seen we hope we would be able to secure for no more than £275,000. We have savings of £10k too. I'd guess that we'd need around £90K perhaps less depending on what we end up selling mine for and what offer the vendors would accept. The vendors won't consider an offer at the moment as we only put our property on the market a few days after viewing theirs as we had been looking for over 2 years and never found anything! Now we have seen something and don't want to lose it either.

Is a bridging loan an option and how would this work? We are both completely confused...

princeofpounds

To be frank with the kind of redemption fee you are talking about, I would be tempted to pay it in order to move in the most flexible way possible.


You are looking at something like 7k in charges, but given you are paying about 2.1k a year in interest on that mortgage, and could be paying something more like 0.7k on a (for the sake of example) 2% mortgage. So the real cost of early repayment is more like 4k. It's not nothing, but it might be worth it to leave you unencumbered to pursue the property and the mortgage deal you want.


A bridging loan might also be an option. Or possibly even a second charge mortgage, if you think it might make sense to keep the old property and rent it out (although that will obviously necessitate a larger mortgage on the new property).


But I think you'll find that the indirect costs involved in such 'creative' solutions are going to comparable with the early redemption.

getmore4less

What is the ECR based on?

£7k is 20% very high.

What new borrowing rates does the lender have?

kingstreet

Exactly what I was going to ask/say.

£7k on £35k?

rachelandgromit

Thank you for all the helpful replies. The £7K odd penalty is a set fee. It has been the same since I took out the mortgage so has always been £7K. I probably should have ditched the fix sooner but as my partner had a property and only in the last few years did she sell and we then only recently actually saw a property we liked we have held of marketing mine being scared of selling and having nowhere to move to previously. This is the first property in over 2 years we've been serious about purchasing! Our property is a bungalow and we are looking at a buying a bungalow (bigger) of which there aren't many!

I reduced the term of the mortgage so literally when the fix is up in June 2016 the mortgage is paid off. We can't reduce the term of it anymore as we are tied into the fish and duration unless we pay the 7K fee!

getmore4less

Which lender?

One for the brokers if it can be challenged.


2016 or 2018

rachelandgromit

Sorry it's up in June 2018. It's with the Principality Building Society who have been less than helpful. Even their current offers aren't too appealing to be honest either.

I guess even if I ditched the mortgage and paid the fee I'd have to wait until selling it before applying for a new mortgage jointly with my partner? So selling mine first, moving into temporary accommodation and then applying for a new mortgage jointly whilst hoping the property we have seen stays on the market!

At the time I took out the mortgage I was on my own and there was bit murmurs of interest rates rising astronomically and then the recession hit!

rachelandgromit

Would people recommended speaking to a broker or will being tied into rhis with the Principality Building Society prevent me from using a broker etc.

Thrugelmir

rachelandgromit wrote: »

Is a bridging loan an option and how would this work? We are both completely confused...

Realistically you need to sell yours and take it forwards from there. In the meantime the months will pass by.

Principality seem to be offering mortgages at ok rates. What's your issue?

When you say less than helpful. You entered a contractual arrangement. So quite rightly there'll enforce the terms. You'd be upset if they didn't and imposed something on you. .

rachelandgromit

I mean less than helpful in that everytime I ring up I get different info! Firstly being told I can't port then I can then whether there was a fee for transfer of equity and charges for redemption etc and processes involved.....

I'm well aware of the terms. It's just working out the best option.

pathtofreedom

You'd need to understand how your mortgage works exactly. I'm hopefully moving next week and porting my current mortgage over, as well as needing some extra borrowing. This means I pay my fixed rate for what's left of my current mortgage, then the rest is at a lower rate that you can get now. If you only have 35k left on the current mortgage, when you get your new mortgage are you looking for another fix or for how long? As you might be able to just port the 35k, get a longer fix for the rest (if that's what you want) then once you get to 2018, remortgage the 35k part then - or just over pay like crazy till then so you pay that part off faster than the higher rate part.

Either way a chat with a broker might be in order to do the sums properly, as it is so high, it might not be worth paying the 7k to get out of it, if you think you could just over pay over x amount of years to clear that part.