About to switch to repayment

nickster1970

Dear All,

Firstly, what a great site! This, at last is my first post...

After a couple of years on an interest only mortgage, a better financial situation means that I'm about to convert - a little late - to repayment, with the aim of overpaying as often as possible. My payments will go up, naturally, but I have a helpful soul paying me some rent at the moment. My existing lender seems to be the cheapest option when fees are taken into account, and I need to choose from the following:

SVR-1% - no lock in, ability to overpay as much as you like, whenever you like..
SVR-1.1% - 2yr lock in, one overpayment per year, max 10%.
SVR-1.2% - 3yr lock in, overpayments as above.
SVR-1.3% - 5yr lock in, overpayments as above.

I'm tempted firstly by the 5yr cheap deal, naturally, but the freedom of the no-ties also appeals, even if I might never be able to pay off a large lump sum. What would the money saving experts - far more seasoned than me! - do in my situation?

Keep saving!

Nick

markdirect

SVR - standard variable rate controlled by bank. Means if you look at your terms and conditions normally states a contractual maximum interest like +s 4% above BR Base Rate . This is what your bank can charge you if you become more of a risk and vary at its discretion and less control from you.
in my experience expressed without prejudice. I would never agree to any svr rate unless it was controlled by BR ie BR+1% = Banks Int Rate . This can then be monitored by you externally . This often called a base rate tracker.
No tie ins are better at all if you likely to have big lump to pay off capital over next 3 years so your required monthly mortgage payments are actually reducing some capital rather than minimal amount to start as mostly interest

Ask you lender for this type of repayment vehcicle option. I would ask him to spread all costs to switch and redeem equally over term as added to interest .This will give a reallstic idea of what your getting. A key repayment schedule would illustrate interest and repayments over period of mortgage

All your details need checking as this affects the above advice, so summurising
1) Be careful of any svr rate not set at a fixed margin to base rate
2)Be careful about tie in , they often unequally proportion loans to look good but give you the wrong real picture.
3) Ask how much the whole package will cost you in interest and all costs at end of term
4) Like at the effect of paying an addtional top up monthly payment that you can maintain £50 to £100 . and specifiy this be always paid as recieved of capital only and no other reason. This will significantly reduce the actual interest you pay because l;oan term shortened

I 'm not an advisor so have my comments checked

Best of Luck

Mark

Hope this of some use

Mark

nickster1970

Thanks Mark - very helpful! Having read your reply, I went back and checked my notes (I was scribbling more or less from memory this afternoon), and, in fact, the tie-in mortgages are all SVR minus something or other, while the no tie-in is actually BR+1% not SVR-1% as I previously wrote.

I have some money tucked away at the moment from scrimping and saving, so I think I will look again at the longer term deal, as I reckon I can pay off a large chunk of it right at the start.

Any further advice would be gratefully received, but thanks again for advice already given.

Best wishes,

Nick