6 months left on a mortgage deal - how much to put on new mortgage application and when to overpay?

johnnybaloney

Hello,

I'm approaching my first remortgaging experience with just over 6 months before my current promo offer ends, nearing the end of first 5 years into my 25-year mortgage. I've seen a lot of general advice about remortgaging but I have some questions about the practical steps.

Let's say, for the sake of argument, that I owe 126k at the moment, pay 1k a month and have 10k of savings that I may put towards an overpayment. I want to continue paying off at the same rate as before so I'll be looking for 20-year deal.

First question I have is what amount shall I use when asking for quotes? I suppose the answer is the amount I will want to borrow at the point the current promo offer ends, right, so 120k (since I'll pay off 6k over the next 6 months)?

But what happens when what I owe at the end of the current deal is off by some amount? Let's say that I actually need £119,500 or £120,500 how is this difference handled? Do I get the extra paid into my account in the first case or get asked by the current bank to top-up because the missing £500 is not covered by the new mortgage in the second?

The other question I have is about the overpayment. Should I reduce the amount when I ask for a new deal by 10k if I'm 100% sure that I'll overpay? Will that cause any complications with the process, paperwork etc. because it seems that I need 120k but I'm asking for only 110k?

My thinking is I'm on a good deal right now, so no rush with that overpayment, let it still earn interest in a savings account and then overpay just a few days before the deal ends. On the other hand, if this is going to cause extra trouble with the new mortgage applications perhaps I should overpay before I start searching for a new deal to save myself extra headache...

K_S

@johnnybaloney

First question I have is what amount shall I use when asking for quotes? - whatever amount you want the new lender to lend, 120k in your case, as you said

But what happens when what I owe at the end of the current deal is off by some amount?
- If it's less than 120k, either the solicitor will pay over any surplus back to you or (with some lenders) they will adjust the loan amount downwards close to completion to match the amount due.
- if it's more than 120k, usually the solicitor will ask you to transfer the deficit to them prior to completion

johnnybaloney said:

Hello,

I'm approaching my first remortgaging experience with just over 6 months before my current promo offer ends, nearing the end of first 5 years into my 25-year mortgage. I've seen a lot of general advice about remortgaging but I have some questions about the practical steps.

Let's say, for the sake of argument, that I owe 126k at the moment, pay 1k a month and have 10k of savings that I may put towards an overpayment. I want to continue paying off at the same rate as before so I'll be looking for 20-year deal.

First question I have is what amount shall I use when asking for quotes? I suppose the answer is the amount I will want to borrow at the point the current promo offer ends, right, so 120k (since I'll pay off 6k over the next 6 months)?

But what happens when what I owe at the end of the current deal is off by some amount? Let's say that I actually need £119,500 or £120,500 how is this difference handled? Do I get the extra paid into my account in the first case or get asked by the current bank to top-up because the missing £500 is not covered by the new mortgage in the second?

The other question I have is about the overpayment. Should I reduce the amount when I ask for a new deal by 10k if I'm 100% sure that I'll overpay? Will that cause any complications with the process, paperwork etc. because it seems that I need 120k but I'm asking for only 110k?

My thinking is I'm on a good deal right now, so no rush with that overpayment, let it still earn interest in a savings account and then overpay just a few days before the deal ends. On the other hand, if this is going to cause extra trouble with the new mortgage applications perhaps I should overpay before I start searching for a new deal to save myself extra headache...

Newbie_John

Just do the maths here, if you have 10k - this would earn £400 over a year (4% best instant access) - <£200 in your case as you would only keep it for under 6 months. 
Depending on what your current mortgage rate is - let's say 2%, then your savings are actually less.. half of £200 - you pay £100 on your £10k loan - so you could save up to £100 waiting.

Other things to consider is LTV - will it take you to lower threshold? Are you higher tax payer and you'll pay tax on interests?
How much can you overpay? 10%? so this would be £12k max before hitting penalties.

Based on your example I would have paid it off now, you may lose some £ but it would simplify your case.