What do I do?

savealittlespendalittle

Hi, I was wondering if I could ask for some help and advice please? My husband and I have been making overpayments on our mortgage for some time now and are soon to be finishing the fixed term part of our mortgage.  We will have £64000 to pay off and were planning to do so in 5 years.

However, lockdown has made us realise that our home isn’t our forever home. We love it when inside but various issues mean that we would like to move. The types of houses we would like mean taking our a big mortgage but seeing as we are in our mid 30s we are happy to do this.

The market is obviously slow and not moving at the moment and so we can’t guarantee when a new house will come up.  Ideally we’d like to move in the next year.

What so we do about our mortgage?

Option 1) Revert to the Standard variable rate, where the interest rate is considerably higher 3.45% I think, but the actually money out of our bank would be less.  This will allow us to make unlimited overpayments.

Option 2) Get another 5 year fix and work headlong into clearing the debt we have whilst we are looking for a new house. The mortgage would be portable, but may limit the houses we will be able to afford if the bank don’t agree to increase our mortgage amount to buy a new mortgage. This would mean taking out a second mortgage which would be another expense.

Option 3) Fix for two years, try and clear as much as we can but set the rate as low as possible so that we can afford an additional mortgage when we buy a new house?

Any other options to consider would also be very welcomed. This isn’t our area of expertise and although I feel we’ve done well to pay off so much of our mortgage, we’ve only ever bought one house and are by no means experts in buying and selling a house at the same time. 

haras_n0sirrah

Hi. Which lender are you with? If you are definitely going to move I wouldn't necessarily tie into anything as with this current market with a lot of changing lender criteria it could mean having to pay an erc if your lender doesn't allow you to borrow enough on your onward move. Some lenders offer no tie in trackers and if your current lender doesn't Then a lot of lenders have free valuation and free solicitors making the move relatively cost free. Consult a whole of market broker to run some numbers. If you don't have one why not read the boards and pm a broker from here you feel gives good advice. We aren't allowed to approach people but most of us are able to answer pms from people who would like assistance.

getmore4less

£64k in 5 years  payment is ~£1,100 whats full term and contractual payment?
Have you go the costs for moving saved up yet?
How tight will the prospective new borrowing be? that could influence the choice, but even then things can change which mean you can't move to what you want.
Low/no ERC products, does your current lender have them?.
flexible porting lender, is yours?
good headroom on borrowing capacity, you can add years to make it fit better maybe up to 35years if mid 30's
re 2. if you need to port and your lender won't increase your borrowing you need to move the lot to a new lender with ERC if applicable getting a second mortgage is often not a choice or very expensive as a second charge.

This is one where a broker can come in handy to asses the next mortgage requirements in advance to guide the current options to try and get with the right lender(good at offering porting and extra borrowing rates) or mitigate the change of lender costs as close to zero.for lower cost than SVR 
but then how bad would SVR be on £64k for a year or two?
term/rate/payment
.........1.5%.....3.45%
05y....£1108...£1,163  (+£55pm)
15y....£397....£456   (+59pm)
But in 12 months time paying the higher amount for each term the difference in balance is the real cost not the difference in payment * 12
05years £1150 extra on SVR
15years £1227 extra on SVR
if you can make the move happen in a years or so probably going to cost around £1,000-£1,500 depending on timing.
if it dragged on for 2 years £2k+