Mortgage pending house move

teecee90

Can anyone advice the best course of action in my current situation?

I have just come to the end of a fixed rate period on my mortgage which means the rate is due to increase from 4.8% to 6.75% variable. Obviously I want to remortgage to get a better deal. The problem is that I have currently got my house up for sale and hope to sell it within the next 6-12 months. Consequently, I will need to re-mortgage again sometime within the next 12 months.

If I go for another fixed rate mortgage I will presumably have to pay penalties if I re-mortgage again before the fixed rate expires. Do I stick with a variable rate or is it likely to be cheaper to pay the penalties?

Any advice much appreciated.

herbiesjp

You could re-mortgage onto a scheme that that did not have any penalties, or closing fees, so that when you did sell and got the new mortgage on the new property you would not have any fees to pay.

teecee90

Do you have any recommendations for competitive mortgages that don't have any penalties at all? Most of the ones I've looked at so far have some form of special starting rate that includes penalties for early repayment.

MarkyMarkD

Better advice than herbies (with respect) is to choose a good product (fixed or discounted and with penalties), but make sure that the lender will let you "port" the loan to the new house when you move. Most will do this and you won't then have to pay the penalties.

You will normally have to borrow the same amount again, so it won't work very well unless you are going to maintain the size of your loan - but then again, most people do.

A&L (for example, as my mortgage is now with them) allow you to reduce the capital balance by up to 25% without balance, when porting, which is a useful benefit if you might borrow less on the new house.

If you take herbies' approach, you are likely to pay a higher rate on the short-term remortgage, and also quite likely have to pay application fees twice.

herbiesjp

Marky - you can find re-mortgage deals with no fees, so no application fee to pay.

You could get a deal now, but a lot of people believe rates could go down by the end of the year, so why choose a product to port, if you can get out of the current deal and then choose a competitive rate once you have sold the property.

Again there are deals that will let you do this with no penalty and with currently no closing fees.

When advising someone to port - you seem to make assumptions based around the loan amount - which may or not make porting a viable option

Sorry other side of the coin here - lol

MarkyMarkD

Agreed, herbies, there are two sides to the coin.

If I really wanted a fix, I can see that it might be worth getting a "no penalties" deal, in case rates fall substantially. But again, the products with the best rates are those with penalties.

If I wanted a discount/tracker, I can see no point not going for one with penalties, and then porting it, as the movement in rates will flow through on the discount/tracker product anyway.

You're absolutely right that the new loan amount makes a big difference - but that's why I said I wouldn't do it unless I was definitely going to borrow at least the same amount, or apply to a lender who allows some reduction in the capital balance on porting.

BenL

Teecee, you are in a very similar situation as to myself.

I currently have a Nationwide Fixed rate mortgage.

I went to see the adviser a few months ago when we put the house on the market to see about an increas ein lending.

We can now borrow more money due to wages rises for myself and partner and nationwide would setup an extra mortgage for the difference.

This was a few months ago, the fixed rate finishes at the end of July ad they said we could either have the extra as a new fixed rate deal or leave that as the base rate product then when the fixed rate ends combine them both into a new product.

I was very surprised at what they could do and left v impressed.

Ben