Fixed rate ending - staying with current mortgage provider

lizrow

Good morning.

When I bought my first house, I took out a 2yr fixed rate thinking I wouldn’t be in this house for very long. Of course things haven’t gone quite to plan and so I am stuck here. My fixed rate ends on 31st October 2018.

I have a mortgage consultation via the telephone for free with my Building society, on 30th August.

I’m considering asking to reduce the term to 5yrs rather than the current 11.5 on the remaining, in the hope I will get a better interest rate, and have it fixed for 3ys, whilst in the background saving enough to redeem the mortgage once the 3yr fix is up.

What do you guys think about that??

The other option is to continue with the current term of the mortgage and just negotiate with them the interest rate I’ll pay. I don’t currently know what any rates they can offer me are. I’ll find out at the end of August.

I don’t want to try and remortgage with another company - I can’t at the moment afford the solicitors costs to do that right now and trying to find another lender for shared ownership is a pain.

I had a look on the main site and there doesn’t seem to be any advice on sticking with your current provider at the end of the fixed rate deal.

So what is your advice please?

Ta!

kingstreet

See what customer retention products your lender has to offer.

Will you be able to justify the reduced term on affordability grounds? Why not stick with the same term and make voluntary overpayments when you can/wish?

Typically, a remortgage will see some of the legal costs paid for you, so don't rule it out yet. Do some research on the options open to you.

lizrow

That’s interesting about the legal costs possibly being coveted.

Regarding overpayments vs shortening term, the absolute most I am allowed to overpay is 10% of the remaining balance. Which whilst it’s £37,300 is fine! But as the balance gets lower, I’m limited and I’d like to not pay anymore interest than I absolutely have to.

I’ve estimated on a 4% mortgage over 5 years, the monthly repayment would be £600ish. That’s what I’m currently overpaying now so affordability won’t be a problem

Lotak

lizrow wrote: »

That’s interesting about the legal costs possibly being coveted.

Regarding overpayments vs shortening term, the absolute most I am allowed to overpay is 10% of the remaining balance. Which whilst it’s £37,300 is fine! But as the balance gets lower, I’m limited and I’d like to not pay anymore interest than I absolutely have to.

I’ve estimated on a 4% mortgage over 5 years, the monthly repayment would be £600ish. That’s what I’m currently overpaying now so affordability won’t be a problem

You can always move to another lender that allows a higher % overpayment. I know first direct allows unlimited overpayments, so long as you don't clear the balance within the period. Metro bank allow 20%. Some lenders have a more expensive rate but allow 50%.

I don't think reducing term will secure you a better interest rate, unless the lender will offer you a bespoke product (which seems unlikely).
It may well be worth exploring the market to find a product with a low / zero fee, free legals / vals and a high percentage / unlimited overpayments You will certainly be able to find a product that meets your needs, at a much more competitive rate than 4% (assuming you have good credit).

lizrow

Thanks Lotak.

The main problem I’ve been having trying to find another lender, is it’s shared ownership. For example First Direct who I bank with and have a loan with, won’t consider my application because they absolutely don’t do shares ownership.

I think I’m also very nervous about getting another solicitor involved because the one I had to purchase the property was so incompetent, I’m actually afraid of the process lol. I know that sounds ridiculous but I am worried.

Oh it’s so tricky hey.

getmore4less

£37,300 4% over 5 years is £687pm
(£600*12*5 is £36,000)

On a mortgage this size and overpaying I would look at 2 options leaving full term as it is.

2 year fix, max out the overpayment then save and pay a lump some at Y2 then do the same again

if the lender has a tracker that is ok rate with unlimited overpayments if I had more cash flow look at that.

Coupled with a long term 0% spend CC(zero fees) cut the interest a bit.

as long as the LTV is OK you should be looking at rate under 2% not 4%

lizrow

Thanks for replying GM4L.

Lots of things to consider. What would be the difference in doing the 2yr fix and save over the reduced term fix for 3yrs? Isn’t the 2yr more risky? What if I can’t get the same or better deal? Would it not be worth the extra year of certainty?

Cheers

kingstreet

lizrow wrote: »

the absolute most I am allowed to overpay is 10% of the remaining balance

How do you know that? You can't/shouldn't assume the terms of your current fix will be the same as any new product you choose.

lizrow

They’ve already told me that’s the most I’m allowed to overpay with them

kingstreet

lizrow wrote: »

They’ve already told me that’s the most I’m allowed to overpay with them

That should only apply while you are on your current special rate. Once that ends, you should be able to make unlimited overpayments without penalty, then the terms of any new product you choose applying for the currency of that product.

Which lender is this please? Not knowing is like blundering around in the dark.

lizrow

I’m with LBS. I’ve just phoned them the man I spoke to confirmed their products have a cap of 10% of the remaining balance of that year.