Advice for first time remortgage on a 10 year fix, do I end early for cheaper mortgage?

mickym

Hi,

Took out a mortgage of £115,000 with Yorkshire Building Society with a 10 year fix (at rate of 4.39%) in December 2011. The property value at time of purchase was £155,000 (we used a cash deposit of £40,000)

We pay £631 per month for it.

Outstanding balance is approx £94,000.

We are able to exit the current deal with an early repayment fee of £1880.

The property has increased in value a fair bit, with local properties listed for around £230-250k now.

I am a cautious person, hence the reason why we went for a 10 year fix, so I am considering investigating whether it is worth getting another long term deal incase Brexit causes rates to rise. Also, I'm wondering if I can get a cheaper mortgage too!

One thing Id like to know is how strict are lenders when it comes to checking affordability in our case? I know when we got our first mortgage, we only had our first child, where my wife had p60 from full time work, however since then she only works part time. We have never missed a payment of mortgage and get by ok, I wondered if this would be an issue for us?

Would be interested in the forums thoughts on this and anyone that has done similar?

Thanks

foxy-stoat

If you are looking for a 38% LTV mortgage then the risk is lower than most.

If your joint earnings are over £25,000 and have minimal debt I would think you would have no trouble in finding a better rate.

You just need to crunch the numbers to see how much you will save buy switching.

mickym

I have done a quick look on a comparison website and my own lender (Yorkshire) and it looks like a new fixed term mortgage would be around £80-100 cheaper per month... does that sound about right?

is it advisable to get the remortgage cover the early exit fee... or is does this add a lot extra cost (with regards interest) over the long term?

Obviously id like as cheap as possible for my remaining term (17 years), and if i can get cheaper repayments per month, I may be able to then afford some overpayments to help shorten the term.

getmore4less

Look at Coventry 10y fix with a 5y ERC window 2.25%


On £90k with 2% saving you cover the ERC in about a year.

mickym

Yes I spotted that on a deals website .. looks very good and offers me estimated monthly repayment of £400, a fair saving per month!!

Any idea how long that offer is on for? I may have to get my skates on to get it.

mickym

Im looking at those 5 and 10 year fixes with Coventry which have a max LTV of 50%

A question about it:

As mentioned in my original post our property now is worth more so our LTV value is different for a future mortgage.

Current mortgage balance £94,000 on our property that is valued at approximately £240,000 which seems to give us a LTV value of 39.1%

If this new mortgage we get is portable, what would happen say if we wanted to move to a more expensive property within the duration of the fix.... would the lender only allow us to borrow up to the 50% LTV set out in the term of the fix we get?

getmore4less

picking up on this point.

I am a cautious person, hence the reason why we went for a 10 year fix

Many make the mistake of thinking the long term fix is the safe option without looking at the risks

They think they are reducing the risk when often all that happens is they have changed risks but many people don't bother looking at the new risks and understanding them.

The biggest change of risk being you are locking into a higher rate/payment and need to review regularly to ensure it is still competitive and meet the original needs.

With fixes you have some key trigger review dates.
ERC changes each step down the cost to change goes down.
LTV as the LTV improves rates tend to drop.
FIX options as there is an alternative that will see out the term for a 10y these are usually at years 3,5,7,8 as there are products that replace to the same term.

---

looking back at Dec 11

You had a thread on the proposal
https://forums.moneysavingexpert.com/showthread.php?t=3464861

why did you go for the no fee when the fee based option would have saved you money?


Base rates were at 0.5%
LTV 75%

this was the ERC profile

here are the charges:

7% to 30/11/14
6% to 30/11/16
4% to 30/11/18
2% to 30/11/20
1% to 30/11/21

Key review dates there were
end of 16 when the 5 year fixes and the ERC dropped to 4%
end of 18(now) when the ERC dropped to 2% 3 years to go.

Also it would have been worth keeping an eye on LTV hitting 70,65,60.
at the 5 year point you were under 65% on original value.

I think you missed a chance to save money late 16 when there were 5y fixed around 2.2% even with a 4% erc you would have saved 2% on each of the next 5 years.

but that's passed

There will be good options now.

Just remember if you go long term review regularly

mickym

Hi Getmore4less, thanks for your reply. Appreciate the insight.

I have kept an eye on options over the last few years, but the Early Repayment Charges were quite high up until this year, and I didn't have savings to cover the cost of them, hence why now I'm looking at the options.

Reading in another thread about the Coventry deal, apparently the 10 year offer they doing does not have ERC after the fifth year, which seems quite a good feature of their offer.

https://www.coventrybuildingsociety.co.uk/consumer/product/mortgages/standard/fhq83.html

getmore4less

For a lot of people that Coventry 10y deal is a great option if other criteria fit.

The potential extra costs of getting it wrong are not too high against a 5y fix, couple with the get out option after Y5 if rates don't move enough, along with the potential saving if they rise more than 3 times in the first 5 years.

You need to satisfy you fit the offer, especially before the 5y are up if you are planning a move and will need more money.

I would look at what Coventry offer as extra borrowing and any restrictions to assess if would likely port with them or move lender.

mickym

Thanks @getmore4less your a star an your help and feedback is very much appreciated. Will no doubt will be back again with some further questions!

AnotherJoe

mickym wrote: »

so I am considering investigating whether it is worth getting another long term deal in case Brexit causes rates to rise.



Also, I'm wondering if I can get a cheaper mortgage too!
Your rate is very high, you should be able to halve it.


One thing Id like to know is how strict are lenders when it comes to checking affordability in our case? I know when we got our first mortgage, we only had our first child, where my wife had p60 from full time work, however since then she only works part time. We have never missed a payment of mortgage and get by ok, I wondered if this would be an issue for us?


All new lenders will check affordability ! Not sure what you are asking?


Would be interested in the forums thoughts on this and anyone that has done similar?

Thanks

Why do you think Brexit would cause rates to rise? Its more likely to make them fall !