Mortgage Advice

Pipz

Hi all,

A little speculative but here goes:

50% share of a 1 bed flat - c£30K Mortgage outstanding coming off 5 year fix @3.49%

Considered options:

1. Renew on a new deal (2 year tracker) at the same term remaining (disposable income increased through lower interest rate).

2. Renew/remortgage on a new deal (2 year tracker) but extend term remaining to 30 years (disposable income increased through term increase/lower interest rate).

3. Remortgage to 5 year fixed rate, purchasing additional 50% share and extending term to 30 years.

Option 3 is the end goal, just a question of sooner or later. The plan if following option 1/2 is to invest any disposable income to better prepare for option 3 after 2 years.

The property was worth £200K 5 years ago, it's in the £300K territory presently and whilst I have a DiP that covers me for option 3 at present I'm wondering if property prices may drop over the next few years therefore reducing the cost of the final 50%, of course prices could increase.

With the above in mind - which option would you choose?

amnblog

Your property rose 50% in value over 5 years.

The extra 50% share will now cost you £150,000 to buy rather than £100,000.

£833 a month.

How does that compare to your mortgage payment?

Pipz

The mortgage currently is c£353 per month at 3.49%, the rent is £298.25 combined payment £c651.25.

Using MSE's mortgage Beta I returned results on a £180K (cost of additional share plus existing mortgage value) mortgage that compared with the current rent and mortgage payments combined.

If prices drop then I would likely benefit more by holding off and then purchasing the final share as capital depreciation would result in a higher saving than fixing now to avoid the interest rates creeping up.

It's all very speculative I know.

dimbo61

Will someone want to buy 50% of your flat if you want to sell ?
If you buy the other 50% now you will own the property ( with a large Mortgage )
Crystal ball time.
Can you afford a bigger mortgage for the whole property

Debtslayer

What area of the country are you in?
What's the term of your current mortgage?
Could you afford option 3? Or would it be a stretch? What would be interest rate?

Pipz

dimbo61 wrote: »

Will someone want to buy 50% of your flat if you want to sell ?
If you buy the other 50% now you will own the property ( with a large Mortgage )
Crystal ball time.
Can you afford a bigger mortgage for the whole property

1. At present I have no intention or need of selling but the HA would have first refusal if I did need to. Owning outright would allow me to sell on the open market.

2. At present yes, I've obtained a DiP from L&C for £180K and I've reserve capital to cover relevant fees etc.

Pipz

Debtslayer wrote: »

What area of the country are you in?
What's the term of your current mortgage?
Could you afford option 3? Or would it be a stretch? What would be interest rate?

1. London

2. Current term is about 9 years (original term 25 years at the time of purchase in 2013).

3. At current rates show in the MSE Beta (1.5-2.0%) the cost of mortgage is comparable to the cost of my current mortgage plus the rent. So yes it fits within my current budget.