Help- Remortgage-or not? 30 October 2004 at 9:43AM edited 30 November -1 at 1:00AM in Mortgages & Endowments 3 replies 1.6K views

toozie_2

Hello, I need some advice please?

Our fixed rate mortgage with Abbey has just come to an end. We have been switched to a Tracker rate of 5.75%. We only have 3 years left of the 25 year term, and we don't want to extend this. We owe £17,000 on endowment and £7000 on repayment.

The endowment has underperformed (surpise...surprise) but I have received comp, which is locked away in a fixed rate ISA for another 2.5 years. This will almost cover the perdicted shortfall of the endowment.

I can't really afford to change the whole thing to repayment, and do not want to extend the years, or borrow more.

With fee's etc, for the next 3 years, is it finantially worth moving, and will any financial institution be interested in taking a relavively small mortgage, when I'm not borrowing more. My repayments are now £296 per month.

Any advice would be appreciated?

Thank you.

MarkyMarkD

Minimum loan sizes vary between mortgage lenders, from £10k to £25k IIRC.  So some won't want your business at £24k, or at least not on a competitive product.  But it might be worth taking an advance of £25k just to qualify for the best products.

And many lenders won't take on a new loan for less than 5 years.

I would suggest using a comparison engine like Charcol Online, but you can only search for terms of 5 years or more.

I'd still give it a go anyway.  

Of course, do you realise that as long as you get a product which allows over-payments, you could set your mortgage term as 5 years, but actually repay it all (or nearly all) after 3 years.  If you did this, I would set the repayment part of your loan higher - say £10k - so you would have repaid the £7k after 3 years.  (Need to do the maths to get this one right).

I expect it will (just about) be worth moving, but you obviously aren't going to save huge amounts when your total payments over three years are under £15k.

toozie_2

Thankyou Marky, think I'll need a free afternoon to consider all options. ;D

Reaper

I think the benefits will be marginal. If you could knock, say, 1% off your current interest rate that would save you £240pa, but that figure will decline somewhat as your repayment shrinks the capital.

The discounted interest rate deals usually involve an admin fee and often you may need to pay solicitors fees and have a new valuation done. There may even be exit fees from Abbey. These all need to be added up to see if the saving is worth it. Because fees are generally fixed regardless of the size of the mortgage remortaging is less effective for those with small mortgages.

When looking try to go for one of the deals which pay your legal fees and give free valuations, but even so I suspect that once you have ferreted out all the small print you may be better off staying where you are.