Remortgaging when intend to sell?

Flipjango

We moved to a new area last year buying a fixer upper house we had every intention of living in for 10 years, with a fairly large mortgage. Sadly It’s not really worked out for us here and we’ve decided we’d like to move somewhere else (to a new town I mean) when we finish the renovations. The problem is, due to Brexit the property market is really slow here at the moment and things are not selling very quickly. We doubt we’ll have finished the house before next autumn and have a fixed rate mortgage that runs out next March. It gives us 6 months to sell after we finish which in a buoyant market would be fine, but in the current market, who knows if we can sell at all? We don’t intend to buy right away when we move as we’d like to rent whilst we decide on new areas and get schools sorted out so we won’t be in a position to port a mortgage. So what do I do when the fixed term ends if we still haven't sold? We currently have a 1.3% rate and would struggle with the repayments at the banks SVR of 4% for very long- fine in a buoyant market where the house would sell quickly, but potentially very problematic if the house lingered on the market for a year. Whilst we could afford to cover the payments, it would mean a big change of lifestyle which isn't exactly desirable. So I was just wondering what mortgage options there are in such a situation? Are the mortgages that don't have any fixed periods at all that would be cheaper than our lenders SVR? As we've still got a fair amount of time until we can sell I'd just like to prepare for the worst so it'd be good to know what position we are in.

Carrot007

You should not have been given t he mortgage if you will struggle on SVR.


However. Find a whole market broker and ask for the best option given your circumstances. Being lowest early redemption and be prepared to stay put for at least one year. You will not get the best but you will get better than not trying. (or ask for whatever you want, just do ask).

hazyjo

Options:

Sell on as a fixer upper (may already be worth more than you paid if you've done most of the work already).

Pay someone to finish the house - may be cheaper than what you'll lose with higher mortgage payments.

You have nearly a year. How much can you realistically save during that time to cover the extra? Can you both take on extra work or overtime? Take in a lodger for a while? Sell stuff? Will you both be getting pay increases and/or bonuses during that time?

Try the budgeting boards, and take a look at: https://www.moneysavingexpert.com/family/money-help/

I've managed several extra payments on my own when I was in your shoes (was buying cheaper so couldn't port mortgage), and agree with Carrot007 that you shouldn't have been given that mortgage if you were that reliant on low rates!

Flipjango

Carrot007 wrote: »

You should not have been given t he mortgage if you will struggle on SVR

We wouldn’t struggle in the way you mean- we could pay it, but obviously such a substantial uplift for a long period would mean a change in lifestyle which is certainly undesirable.

Flipjango

hazyjo wrote: »

Options:

Sell on as a fixer upper (may already be worth more than you paid if you've done most of the work already).

Pay someone to finish the house - may be cheaper than what you'll lose with higher mortgage payments.

You have nearly a year. How much can you realistically save during that time to cover the extra? Can you both take on extra work or overtime? Take in a lodger for a while? Sell stuff? Will you both be getting pay increases and/or bonuses during that time?

Thanks, but that's not really the problem. There's no point trying to sell earlier as we have a fixed term on our mortgage until next March, so we may as well stay here until then or we'll be hit with a massive early redemption charge. The issue isn't finishing the works, the issue is that if the house doesn't sell within 6 months of being put on the market, and our mortgage term expires, then we would be looking at a substantial uplift on our mortgage for a unknown and potentially long period as the market is so terrible at the moment. We could stretch to cover the payments should we need to, so we don't need drastic measures like lodgers or anything like that. But I don't want to pay over the odds for an uncertain period if there are other options that would allow us to remortgage on a better rate without penalties when we sell - I was just wondering if anyone knew what the options were.

hazyjo

Flipjango wrote: »

Thanks, but that's not really the problem. There's no point trying to sell earlier as we have a fixed term on our mortgage until next March, so we may as well stay here until then or we'll be hit with a massive early redemption charge. The issue isn't finishing the works, the issue is that if the house doesn't sell within 6 months of being put on the market, and our mortgage term expires, then we would be looking at a substantial uplift on our mortgage for a unknown and potentially long period as the market is so terrible at the moment. We could stretch to cover the payments should we need to, so we don't need drastic measures like lodgers or anything like that. But I don't want to pay over the odds for an uncertain period if there are other options that would allow us to remortgage on a better rate without penalties when we sell - I was just wondering if anyone knew what the options were.

Have re-read to understand the relevance of the works. You say they are unlikely to be finished by Autumn. So October-ish? When will they be finished? You need the house on the market after Christmas/New Year. Average sale is 12 weeks. You can easily make it last that long. That gives you 3 months before your mortgage expires. Not sure what the six months you mention relates to - is that presuming the works are finished at Autumn and you plan to market the house immediately? No point in that as I doubt you'll get anyone to hang on for 6 months, plus you have said they prob won't be finished. I'm confused lol. Yes, it may well take longer than those 3 months to find a buyer and complete, but hopefully it should only be a few more months on top. I have had two take a year from start to finish, but it's less likely. Was trying to make you some more money during the next year so you could then afford to take the hit for up to a year.

SouthLondonUser

You need a mortgage with no early repayment charge. This typically means a variable rate mortgage; there are some fixed-rate mortgages with no early repayment charges, but they are few, not the best rates and, if you plan to repay the mortgage (selling the property) in less than a year, do you really need the certainty of a fixed rate for such a short period?

Flipjango

SouthLondonUser wrote: »

do you really need the certainty of a fixed rate for such a short period?

We don't need a fixed rate. I think my biggest worry is that our mortgage payments will go up by £1000 a month when we fall onto the SVR, so if the house does linger for a year or more (which doesn't currently seem to be uncommon in the market we're in) could be very costly, so if we can switch to something cheaper, even if its a lower SVR then that would be good.

Flipjango

hazyjo wrote: »

Have re-read to understand the relevance of the works.

You're right, the building works probably aren't all that relevant really, and I don't think I worded my message very well to begin with - have edited now. But anyway, not really looking for ways of making extra money, just ways of saving on the mortgage payments. Our house is in a very specific market that is moving very slowly at the moment (like a year or more to find a buyer as there isn't a nig pool of buyers - its not really a normal 3 bed semi type of thing), and the extra few percent will be a big hit, so its just finding ways of cutting some off that. Thanks for your help.

hazyjo

Flipjango wrote: »

...and the extra few percent will be a big hit, so its just finding ways of cutting some off that. Thanks for your help.

But you can't unless you fix again and it will just lead to the same prob at the end. What you can do, is save some more now so you have money to subsidise the extra you're paying in a year or so's time. Although still not sure you're getting what I'm suggesting... You need to look at the bigger picture. I know you're trying to avoid going onto the bank rate, but you can't. So plan ahead.

Flipjango

hazyjo wrote: »

But you can't unless you fix again and it will just lead to the same prob at the end. What you can do, is save some more now so you have money to subsidise the extra you're paying in a year or so's time. Although still not sure you're getting what I'm suggesting... You need to look at the bigger picture. I know you're trying to avoid going onto the bank rate, but you can't. So plan ahead.

Thanks but that's really not what I'm looking to do. Like I say, we can afford the repayments if we cut back on other things so its really not something we'd be interested in doing. We're not hard up, just looking to make sensible choices - and I definitely don't want to pay a penny more than I have to to the mortgage company as that would just be downstreaming the savings we'd make this year into unnecessary overpayments next year. And actually, using SouthLondonUser's advice above, I've already found a variable rate with no repayment charges at 2.65% so we could save a few hundred pounds a month.