Remortgage advice needed urgently

sintsjo

Please could anyone give me some advice re: remortgaging.

My 2 year fixed rate comes to an end with halifax on 31st july 08.

After watching this site for awhile I was thinking of swapping to first direct - 5 year fixed ofset rate of 5.29% with about £700 fees. Although I have only £2000 to ofset I would be looking at making overpayments of about £850 a month (over the initial £450 interest only payment).

I have reserved this mortgage, however need to make a decision by tomorrow (11.4.08) and would be grateful for any advice as to whether you think this would be a good move. I am good with money and have no worries that I wouldn't make the regular payments. Our outstanding mortgage is 100,000.

Thanks for any help you can offer!! :beer:

KiKi

The FD deals are, IMO, great deals, so I'd go with it. You'll have seen the news about the other mortgage deals which are disappearing fast, and there's no guarantee that the interest rate drop today will be passed onto all those with mortgages.

My only query is why you have an Interest Only Mortgage if you intend to make £850 overpayments? Unless you intend to sell at the end of your mortgage, you're going to have to find a big chunk of money! But if you have the money to repay, which you clearly do, why not go Repayment?

HTH

KiKi

minimike2

You wont find anything cheaper than that about at the moment, I would get it while you can.

_Andy_

Agreed - nothing else on the market as good.
Also agree with the point about overpayments that KiKi made.

nathanhill69

KiKi wrote: »

T
My only query is why you have an Interest Only Mortgage if you intend to make £850 overpayments? Unless you intend to sell at the end of your mortgage, you're going to have to find a big chunk of money! But if you have the money to repay, which you clearly do, why not go Repayment?

HTH

KiKi

If I understand the FD Offset mortgages correctly they are by there very nature interest only mortgages. Based on that, if the OP treats it like a capital repayment mortgage, i.e. paying more than the required monthly interest only payment then that surely is classed as an overpayment. The advantage is they are paying the capital back every month by making these "over payments" BUT also retain the flexibility to draw on these "over payments" during the mortgage term if they so wish.

Am I wide off the mark on this as this to me seems to be the attractiveness of the FD mortgage (along with an a competitive fixed rate) - you can treat it like a repayment mortgage but with great flexibility.

Obviously Minimike2 and Andy are the mortgage "experts" so I'm happy to be corrected.

sintsjo

Thanks for that everyone, its a great help.

I chose the ofset mortgage as I could make overpayments as and when I liked. With a standard mortgage like I have now I am limited to how much overpayment I could make, so figured that as the interest is calculated daily the extra money is better off the mortgage than sat in a savings account.

I am very new to this, but think I am on the right track.

Thanks again:beer:

KiKi

Nathan,

FD offsets do not have to be interest only, they can be repayment.

As I understand it, if you overpay an interest-only mortgage, then you are just overpaying the interest - it's not considered a contribution to the capital repayment. You still have to find the capital at the end of it.

The point is that if you can afford to overpay by £850 a month, then why not get the Offset as a Repayment, and pay off the capital at the same time? Then you won't be in a position of paying the interest off in 3 years, then having to suddenly find the money to pay off the capital, probably through selling your home. That seems mad!

Again, not an expert, and happy to be corrected; but it's certainly how my offset works!

KiKi

minimike2

If you overpay on an interest only mortgage it *has* to come off the capital...where else can the money go?

Yeah if its not paid off in full then the capital balance at the end still has to be paid, but anything paid over the amount of the interest each month comes off the balance....else you would just be paying money into thin air!

nathanhill69

Further to what minimike2 says above (you came in with your postings whilst I was typing mine)....

All First Direct Fixed Rate Offset Mortgages are technically interest only mortgages, so the borrowers obligation each month is only to pay the interest owed. Any payments above the interest owed is termed by FD as "overpayment" and directly reduces the capital loaned. Many borrowers taking out the FD product are treating it as if it were a repayment type mortgage and increase their monthly payments accordingly, thus at the end of their agreed mortgage term the capital has also been paid off.

KiKi

minimike2 wrote: »

If you overpay on an interest only mortgage it *has* to come off the capital...where else can the money go?

Yeah if its not paid off in full then the capital balance at the end still has to be paid, but anything paid over the amount of the interest each month comes off the balance....else you would just be paying money into thin air!

That reads funny!

I assumed it would go towards paying *more* of the interest off more quickly...!

I really should stop commenting on the FD offset mortgage questions because clearly my experience with a different lender is wholly different!

So, I'm wrong, and I'm happy to be wrong and stand (well, sit) here in my wrongness!

KiKi

sintsjo

Thanks for that clarification, so long as the extra money is taken off the remaining mortgage payment that is fine I think I will go ahead with it.

Thanks