Help to buy repayment and mortgage projection advice

babyshambler

Hi All, 
I’m wondering if someone could give me advice. I’m embarrassed to admit I don’t really understand mortgages and I’m getting worried about it. 

My wife and I purchased our house in 2012. The house was £180k and our mortgage was £135k, the remaining £45k was provided by the builders. We had 10 years to pay this back at the value of £45k, or if after this period it would be £45k (plus 25% of any value added to the house) in October 2022 our 5 year fixed mortgage ended and with the interest rates going up our advisor found us a 2 year fixed @3.84% and the builders allowed us another year before we have to repay. Our current fixed mortgage is up in sept 2024. But the remaining balance on the house is due in October this year. When the house was valued last year the builders said it’s worth £260k, so we’d need to repay them £61k if I’ve worked it out properly. 

The balance is just over £95k and our current monthly cost is £585 at 3.84%. 19 years left. 

Our other debts are a car loan due to finish around august next year. It’s about £2400 left and we pay about £230 a month. We also have £1500 on a credit card we are paying the minimum amount monthly. I don’t know how much this is though. 

I was looking at mortgages, and if it went up to 6% our mortgage would be £710 per month (I think/hope I’ve worked it out properly) this would start when the car is paid off so I don’t think we’d notice too much a difference to our outgoings. 

Between us we earn £66k minimum but my wife may get a pay rise (currently on a secondment which if successful and made permanent We could then have £73k) 

im also getting a bonus from work this month for £2000 after tax. I’m weighing up what’s better; paying off the car loan or the credit card. I’d imagine the credit card would be wiser but perhaps as the car loan is more per month it might make us look more attractive with affordability checks. When we get a new mortgage I want to apply for a credit card with lower interest to pay it. Im reluctant to do so now because I understand it may have a negative effect on our credit. 

If we had to add the extra £61k to our mortgage Is there someone who could estimate how much things would cost at current rates. If we added it this year would it be on the 3.84% for the next year or is £95k at that rate and £61k at 6%? Is what I’m suggesting even possible. 

Because I don’t know enough about it or understand it I’m becoming really worried and stressed about what may happen. I know if push comes to shove we could sell our house for something cheaper but I love our house and our family are happy here. I’d hate to leave our house. 

Our mortgage advisor hasn’t contacted us for a while. He was going to try and get info from Nationwide but no info from him yet. We have asked the builders about the potential for another year to delay the final payment. 

Based on the info provided does the situation look as bleak as I’m imagining things becoming? I’d love some reassurance or hear advice or experiences from others in this situation. 

Thank you 

Caz3121

babyshambler said:

My wife and I purchased our house in 2012. The house was £180k and our mortgage was £135k, the remaining £45k was provided by the builders. We had 10 years to pay this back at the value of £45k, or if after this period it would be £45k (plus 25% of any value added to the house) in October 2022 our 5 year fixed mortgage ended and with the interest rates going up our advisor found us a 2 year fixed @3.84% and the builders allowed us another year before we have to repay. Our current fixed mortgage is up in sept 2024. But the remaining balance on the house is due in October this year. When the house was valued last year the builders said it’s worth £260k, so we’d need to repay them £61k if I’ve worked it out properly. 

from the above
Increase in value = £80k
If you pay by October 2023 you will pay them £45k
If you wait till next year you will pay them £65k assuming the property value does not change (may be more, may be less if prices drop)
Would probably make sense to look at additional borrowing before October 23 to save c£20k (does not have to coincide with current deal) the additional borrowing would be at current rate.

re £2k bonus. What are the interest rates on the card and the loan? paying to the highest interest would be best. Paying the minimum on a credit card is a bit of a negative, best to even pay £1 extra so it does not flag as minimum

babyshambler

Sorry I’ve been unclear. The deadline to pay the builders was Oct 2022. 

With regards to interest on the credit card I’m unsure about that. Thanks for the tip about paying a bit extra to exceed the minimum charge. Thanks for replying 

amnblog

If you now need total borrowing of £156,000 (with the extra £61,000 to pay the builders) that will cost around £1,150 per month at today's rates. Affordable, given your incomes, even with the credit card debt and car loan.

If you want to pay off the Builder before your current mortgage rate ends, you can most likely do so. If you prefer to deal with the lot together next year, that is also OK.

You will probably need some advice from a mortgage broker who gets back to you.

babyshambler

Thank you for taking the time to check. I really do appreciate it. How did you calculate it? Should I be inputting 156k over 19 years on a mortgage calculator. 

if I understood the criteria I should be looking for I might feel calmer about it. 

Thank you so much again. 

babyshambler

i should have asked, is adding £61k to a mortgage a common thing to do or is that considered a huge amount at the moment? 

Would nationwide or another company consider it?

CSI_Yorkshire

Adding £61k to a £50k mortgage on a £100k house would be implausible.

Adding £61k to a £250k mortgage on a £1.5m house would be trivial.

You would be ending up with a £156k mortgage on a £260k house.  That's well within "normal" for most lenders.

babyshambler

Thanks CSI. You’ve all put me more at ease

babyshambler

Little update - Still not heard from the mortgage advisor but paid the credit card off. 

babyshambler

Little update 2 - the builders have said it’s very likely we can have another extension. That will be oct 2024, and the fixed term ends Sept 2024

babyshambler

Little update 3 - builders have allowed an extension. Gives us a year to find a solution