Remortgage Advice Needed Please!

amnblog

I don't know what more I can say Subbuteo?


If you owe £225,000 for a year on a 4.79% interest rate, the interest is £225,000 X 4.79% £10,777


If you owe £225,000 for a year on a 3.05% interest rate, the interest is £225,000 X 4.79% £6,862 (£3,915 less).


As you will pay some capital off during the year the figures are slightly different to that - but the difference is minor.


If you want to make a saving you could take a 2.35% rate and save £5,489 in interest per year, moving to fixed if rates start to rise?


I fear however, the whole thing may be academic because when lenders value for re-mortgage purposes the valuation figures you get back are conservative and you may not be able to access 90% rates without putting in some cash.

Subbuteo

I'm not trying to be deliberately difficult, honest!

But it sounds as if you're answering the question 'is it cheaper to have a mortgage at 4.79% or 3.05%' when my question is actually more complex, unless I'm missing something.

What you're saying (if I haven't missed something) is based on the assumption that a person can freely choose between the two products, whereas to work out if it's viable for me to exit a mortgage early, the effects of the cash savings and outflows (reduced payments vs ERC and new product fees) must surely have to be considered, not just the question of whether or not less interest is chargeable? In 12 months I'm free to remortgage without penalty, so surely to decide whether or not it's a good idea for me to incur costs now to terminate before that point, you must consider the net cash position over the next year?

With regards the valuation, I was told by my current lender today that if I were to remortgage with them, my LTV would be 89. something % as they are currently valuing my property at £251k (paid £240k last May).

They say they use the average of the Nationwide and Halifax house price index to calculate the valuation for existing customers who remortgage - not sure if that's standard practice or just this particular lender.

Thrugelmir

Subbuteo wrote: »

Thanks Phil. It's a 34 year term and £225k mortgage required. The £1k fee (with free legals and val) seems about as good as it'll get!

If a valuation is required are you certain of being beneath 90% LTV?

You would save money by making the switch.

If you are concerned for the future then making overpayments is the way to reduce your exposure and reduce the long term cost. As even at 3.05% you are still looking at £137k of interest over the remaining term of the mortgage. Where interest rates to rise then so would the cost.