Changing mortgage offer between exchange & completion

TN1984

Iwonder2 said:

Thrugelmir said:

In 2 years time interest rates may have risen. Then what? All this fluster would have achieved nothing. 

Although this does not negate the original cost between the two - I fully appreciate this may happen and I look forward to finding out!
I am also glad everything else has gone very well and costs have been low so am thankful overall given the situations that seem to occur on here!

The new product fee might negate some of that saving though. Incidentally, I appreciate it is not particularly important to the general question you are asking, but any reason you are comparing a 5 year on 85% LTV versus a 2 year at 80% LTV? I think it is making the differential look higher than it actually is than if you compared like-for-like; of course 2 year would still be lower but it would be closer I assume.

I completely understand why some people always do a 2 year fixed and it would have worked out well over the last decade. Personally I do feel there is a value in that extra certainty of something a bit longer though.

IAMIAM

The thing I hate about HSBC is they credit check every time a change takes place ALL the time. It is annoying.

Iwonder2

TN1984 said:

The new product fee might negate some of that saving though. Incidentally, I appreciate it is not particularly important to the general question you are asking, but any reason you are comparing a 5 year on 85% LTV versus a 2 year at 80% LTV? I think it is making the differential look higher than it actually is than if you compared like-for-like; of course 2 year would still be lower but it would be closer I assume.

I completely understand why some people always do a 2 year fixed and it would have worked out well over the last decade. Personally I do feel there is a value in that extra certainty of something a bit longer though.

Yes - the reason is because if I had chosen to remortgage (which I have decided not to) I would have chosen 80% LTV 2yr at 2.04% due to believing rates will not sky rocket (if anything 85% has done that due to covid) and realising I had the funds to do so. Effectively by putting down an extra 10k in the deposit you nearly make it up again instead of paying it off in interest - so its a double saving.
If you were to compare like for like the 5 year 80% would be 2.24% or the 2yr 85% 2.64% - either of which may have been a better solution.
So it's still a large sum extra between 6 - 10k depending which calculation you make. But cheaper than liability for completion and no mortgage and less annoying than it being rejected on the day of exchange and losing buying costs/time!

2bFrank

I wouldnt risk it, what happens if you get refused, and your original mortgage gets cancelled. The you are on the hook for the property as you have already exchanged.

Ill be honest, if the difference in cost is causing you issues, then I think you may have over stretched yourself. Too late now but I would be very weary, whilst its unlikely, if rates do go up and you are struggling at 2.9% then maybe a 5 year fixed is actually a blessing.

Unless you are planning to move in them five years, then I would't worry so much, concentrate on building up some saving and overpay if possible and it will all balance out anyways.

pinkteapot

I haven't even read all the detail of the original post. You'd be absolutely mad to risk losing your mortgage between exchange and completion. 

Just overpay up to the limit during the fixed period. If you can afford to overpay more, put that money aside in a savings account. At the end of the fixed period, remortgage for the outstanding capital, or less if you've got money in savings to throw at it. 

Iwonder2

2bFrank said:

I wouldnt risk it, what happens if you get refused, and your original mortgage gets cancelled. The you are on the hook for the property as you have already exchanged.

Ill be honest, if the difference in cost is causing you issues, then I think you may have over stretched yourself. Too late now but I would be very weary, whilst its unlikely, if rates do go up and you are struggling at 2.9% then maybe a 5 year fixed is actually a blessing.

Unless you are planning to move in them five years, then I would't worry so much, concentrate on building up some saving and overpay if possible and it will all balance out anyways.

It's not so much the affordability of it.
It is the irritation that on a 2.94% you are effectively paying roughly £425 a month in interest and £238 in capital as opposed to at 2.04% you pay £295 interest (if using same borrowing amount - in actual fact due to lower borrowing amount it would be less at £278). This means a monthly payment of £130-147 extra of interest - as opposed to an overpayment of that amount in pure capital thereby affecting the progression to lower LTVs. Therefore even if you overpay by £130-147 a month on the 2.94% you're only bringing yourself down to the initial position of being on 2.04%.
Just goes to show you can't beat the rate really - an expensive learning curve.