Mortgage agreement coming to an end, advice needed

akira181

I received a letter this morning from HSBC telling me my current fixed rate mortgage will come to an end on 30th November and I will be switched to their SVR one.  This is my first mortgage so the remortgaging process is new to me, any advice is appreciated.  I live in Scotland if that makes a difference.

Based on the estimates in the letter, my current LTV is 77%.  However, two flats in this building recently sold for more than HSBCs estimate for my property (ground floor flat £10k more, 2nd floor flat £20k more, I'm 3rd floor).  If I could get the estimated property value up by £5k, I could drop below 75% LTV (£10 to £15k with a small overpayment could get me below 70% LTV) but I have no idea how to do this or if it's even possible.

Is a remortgage something I should be searching for myself or is going via a broker the best bet here?  If the latter, any recommendations on which broker?  I read the MSE remortgaging PDF guide but the links in it are broken.

pramsay13

Ask friends and relatives for a recommendation for a local mortgage broker although they may well do things remotely at the minute.
They will help with your LTV questions although I'm not sure you will get a different rate.

getmore4less

First thing to do is look at the retention deals which should be a quick and easy product transfer/rate switch.
https://www.hsbc.co.uk/mortgages/our-rates/

LTV....2y and 5y no fee
80% 2.14% 2.29%
75% 1.89% 1.99%
70% 1.89% 1.99%
60% 1.64% 1.74%
if you stick with HSBC then the sweet spot is getting to the 75% LTV, 70% does not improve the rate

Taking the fee/no fee options for the 5y 75% they have 1.69% with £999 fee
The break even for paying the fee will depend on the term/payment.
as an example 1.99% or 1.69% £999 fee over 5 years fix if the full term is over 15 years and mortgage over £80k the fee based product will be cheaper.

term	mortgage to break even
5	£132,725
10	£89,720
15	£80,956
20	£77,192
25	£75,105
30	£73,782
IO	£63,602

for the 2 years options 1.89% and 1.44% £999 fee you need a bigger mortgage.

term	mortgage to break even
5	£138,289.53
10	£123,622.84
15	£119,409.16
20	£117,416.14
25	£116,258.50
30	£115,504.80
IO	£108,738.13

dimbo61

So how much are we talking about to get from 77% down to 75%?
If you have the what £2,000, £3,000 cash to reduce LTV to below the magic 75% and select a new deal with your existing lender.
Can you overpay each month ?

akira181

Sorry for the late reply, weekend was chaotic, I guess not talking numbers was kinda silly since all this is confusing to me. 

We purchased our property (joint mortgage) for £186k with a 15% deposit.  Original mortgage was a 2 year fix for 25 years.  The monthly payment was around £650 and we haven't made any overpayments as I don't really understand that process and we needed to build-up our savings again after the deposit wiped it out.  There is around £149k left and HSBC have estimated a property value of around £195k.  Going from 77% to sub 75% LTV would be a little over £3k overpayment if I don't try to change their valuation, which me and my partner can realistically afford at the moment. 

We would like to increase monthly payments to around £800 now that our savings are looking healthier.  Our rent was £850 a month prior to purchasing and we managed to save for a deposit with that, so it should be sustainable.  I'm looking at a 5 year fix with a term of 17 years to get an approximate £800 monthly payment with the "MSE Mortgage Best Buy Comparison" tool.  The best one that came up was "Lloyds: DIRECT Club LLoyds Fixed till 30-11-25" at 1.57% with a setup fee of £1,034.  That's better than the HSBC retention deal of 1.69% for a 5 year fix with fees of £999 right?

Am I going about this search the right way?  A 10 year fix feels too long term but is it something I should consider with BoE interest rates being crazy low at the moment?

dimbo61

Put the figures through " whatsthecost " 
Add the fees to the outstanding balance or the amount to get 75%LTV !
You need to factor in the exit costs from HSBC ( exit fee ) and any other costs to remortgage to a new lender.
If you stick with HSBC and pay off the £3,000 to get to 75% you might be able to do it all online without any credit checks or lots of paperwork provided you keep the term the same !
Now you want to pay £800/850 a month but you can simply set up an overpayment each month.
This has a number of advantages rather than shortening the term.

akira181

My current fixed rate mortgage is coming to an end, so there shouldn't be any exit fees if I get the new one to start a day after the old ends right?

A rough attempt of crunching the numbers with my limited understanding, I think a 10 year fix is a bad idea as after 5 years, I would be around 55% LTV, which I assume would get me a better rate IF the BoE interest rate hasn't exploded significantly by then.  A 5 year fix with Lloyds at 1.57% seems to be the best rate I can find and going by the numbers @getmore4less posted, paying the fees upfront is going to be beneficial with my current 149k balance and 23 year term.

I think I understand overpayments somewhat better now.  It's something I should consider to get more flexibility however, if I want to go from roughly £630 a month (the Lloyds remortgage rate) to £800 a month by overpaying, I would exceed the annual overpayment allowance of 10%.  Looks like I'd need to lower the term to 18/19 years to get into the £750 range and make the rest up with overpayments.

I may try a free online broker like Mojo (a friends recommendation) to see if they can find me something better

akira181

I spoke with an adviser from Mojo Mortgages and he's just confused me more really as I still don't understand enough about how mortgages are calculated.  He says paying an arrangement fee only makes sense for mortgages above £180k, which conflicts with what @getmore4less posted.

His suggestion was a fee free deal from Barclays at 1.84% for a 5 year fix over 20 years with £400 cashback.  He says that the cost over deal period with Barclays will be less than Lloyds (he used Natwest as an example at 1.59% as the Lloyds offer never came up for him apparently).  The comparison calculator on L&C says the cost over the 5 years is around £300 less with Barclays due to the cashback (£1,300 including Lloyds arrangement fee), but doesn't the higher interest rate mean the amount I pay back over the life of my mortgage will be higher or does it not work like that since ideally you get a new deal whenever the existing one ends?

[Deleted User]

You'll only be paying that rate for the duration of the fix, not the life of your mortgage.

akira181

Deleted_User said:

You'll only be paying that rate for the duration of the fix, not the life of your mortgage.

ah ok, so the cost over the initial fixed rate term is what I should be looking at to find the best deal?

In that case for the Lloyds offer, paying the £999 product fee to get 1.57% costs £44,505 over the 5 years vs no fee at 1.91% with a 5 year cost of £44,898 if the L&C calculator is accurate.  Paying £999 to save £400 over the course of the initial fix doesn't make any sense then if I'm understanding this correctly since my loan amount is "relatively" small.

The Barclays deal the Mojo Mortgage adviser found with £400 cashback comes to a total of £44,209 plus a £35 admin and £80 exit fee.  So unsurprisingly since he's a pro and I'm a noob, it looks like his deal is better than the one I found right?