first time remortgage - is this going to be worth the hassle!!

melt71

I've had a self cert interest only mortgage with Birmingham Midshires for nearly 2 years now. The fixed rate of 5.45% runs out on 1/3/08 and it will go to their standard which I believe is currently 7.5% This means that my monthly payments will go from £493 to about £680.

I went back to my original FA who came back with a couple of options of a fixed rate for 2 years (which is what I asked for as I intend to move house then). He recommended Abbey at a rate of 5.67% meaning the monthly payment will be about £520.

However, this is where is all starts to seem like it's more hassle than it's worth.

Abbey's fees are £999 arrangement, £275 Admin, £40 Telepay, £170 valuation (already paid) and free legal fees - as long as there are no complications!

BM's exist fees are £150

Still with me? Total fees of £1634 (£170 already paid).

My mortgage was originally £108k (house currently worth about £211K) but I added BM's fees to the balance so it is about £108,699 now.

HOWEVER!!!! Just got a redeption statement from the solicitor showing the breakdown of interest charged to the account and payments received. It includes my last payment made (1st Feb) so it's completely up to date and it is showing a shortfall of interest charged/payments made of £652!!!!

How is this even possible on a fixed rate mortgage - they fixed the interest, told me what to pay, I paid it and have never incurred any other charges and never missed a payment - so why the difference?

So that's a total of £2286 just for remortgaging!

My FA is saying it can be added to my new mortgage so not to worry, but quite frankly it doesn't seem worth the bloody hassle if this cancels out any gain from remortgaging! I'm also concerned that my mortgage amount is increasing so much - it will be getting on for £111k after this remortgage and started at £108k under 2 years ago.

Also, because the remortgage isn't going to happen in time for 1/3/08 - I'll have to pay £680 to BM and in the middle of the month when it does complete, I'll have to pay my 1st payment of £520 to Abbey! I've been told will be sorted with the final redeption statement but it's still a hassle to find this extra money in the space of 2 weeks!

I really don't know what to do about this. Any advice for a newbie?

Mel

Trying_to_be_good

Do you pay the mortgage interest at the end of the month (i.e. in arrears) or at the beginning of the month (i.e. before the interest has been accrued)? The additional charge is probably for interest since the last payment.

The charges etc are why I stopped getting two year deals on my remortgages and went for a lifetime tracker instead. Have you looked at deals for longer than two years?

You need to find a way to pay the fees etc rather than add them to the mortgage unless you want the amount you owe to keep increasing.

melt71

I don't know when the interest is added but I make the payment on the 1st of each month. I paid on 1st Feb and the statement was dated 20th Feb (I think, but I'm at work so I can't check).

Therefore, this could account for some of the shortfall but the interest for this month shouldn't be anymore than £493 so there will still be a shortfall even if some of this is interest.

Is it worth ringing them to see what they say? Or will I not get any sense out of them?!

There's no way I can pay these fees up front and to be honest I think over £2k in fees is a lot for a mortgage of this size.

We plan to sell up in 2 years and move to a slightly cheaper area so that we can get a 3 bed for the same price as our 2 bed. I'm not overly concerned about the long term implications it's the short term I'm worried about - committing to the wrong mortgage for 2 years and it not being worth it financially.

Thanks for your reply.

chappers

I make it worth your while to switch by £3264 over the two years as follows

£108,000 at 7.5% will cost you £16,200 over the next two years(£675per month)

If you switch you will have to redeem your current mortgage at £108,000+£150 fee plus the interest shortfall,£652
So your new mortgage will be for £108,802 plus the £999=£109801

so £109801 @ 5.67% will cost you £12451 over 2 years (£581.81per month) plus the other fees which of £40, £275 and £170 which are not added to your mortgage the £170 and the £40 will be payable up front and the £275 can be paid either at the beginning or the end but attract no interest.

this gives you a total over the 2 years of £12936

So £16,200-£12936 gives a saving of £3264 over the two years, this could be slightly more if you find that the £652 shortfall doesnot need to be put into the equation.

Your Mortgage broker should have worked all of this out for you really.

strongboes

How has your house gone from being worth 108k to 211k in 2 years?

chappers

He didn't say it has just said his mortgage was £108K and his house was worth £211k, two unrelated facts

strongboes

Yes chappers quite correct, regards

Red2008

We have just been going through the same thing and the thought of having to pay a couple of grand everytime you remortgage is a nightmare. Have you tried negotiating with your current lender, maybe they could offer you a more attractive deal and then you wouldn't have all the fees to pay or maybe look for another deal with a lower arrangement fee. We found our new rate on mform.co.uk which apparently searches all products. Good luck

Gorgeous_George

It is difficult to compare one mortgage deal against another so, with the help of some fellow MSEers, I knocked a spreadsheet up. If you have Excel, try the spreadsheet to see what you could pay/save. If you don't have Excel, you could use Google docs.

Just click the 'Repayments' tab and fill in the white cells.

GG

melt71

wow thanks for all of your replies, very helpful.

Chappers - just a couple of queries about things you said in your post;

Firstly you mention that my new mortgage should cost £581 per month - Abbey are quoting £519.75 (int only) for 26 months fixed at 5.67%

They are assuming that the remortgage figure will be £109,999 which includes their arrangement fee.

How did you come up with the figure of £581? I'm worried I'm going to be short again at the end of this fixed term!

My existing mortgage was £108K plus fees so I told my FA to use the figure of £109k when we first talked about the remortgage as I didn't know the exact redeption fee then - I'm glad I did as their start figure actually works out £108,615.19.

I've spoken to Birmingham Midshires today and they think the shortfall is happening because the statement includes daily interest until mid March but it does not include my March mortgage payment.. Not sure I'm convinced by this though as my payment of £493 isn't going to clear a difference of £652 is it?

I've raised the point with my FA (he's as confused by the difference as me) and my solicitor (no response yet). Guess we'll have to wait and see what the up to date redeption statement shows when they apply for it again on 3/3/08.

strongboes; If only it had increased in value by £100k in less than 2 years :rotfl:
I bought out my ex husband as part of our divorce settlement. It has increased in value a lot since purchased originally, all houses have in this area, and the valuation now is my share of the equity from when I bought it plus further rises in the market. HTH

chappers

Sorry melt71, typo on my part meant to be £518.81 based on £109801 all other parts of the calcs correct though.

Regards
gareth