Remortgaging - Remaining term on existing mortgage

DaiGonzales

Hi,

This probably seems like a no brainer but I’m new to mortgages and not sure if there’s something obvious I’m not considering so any advice would be much appreciated.

Hopefully there’s enough detail to get the idea (without boring you to sleep!)

We’re moving house (sold ours STC and bought STC) so need to sort out additional borrowing/re-mortgage.

Current mortgage £61,500, 21 years remaining with Nationwide.

Will need additional borrowing/remortgage of £71,000.

We’re looking for some stability in terms of our repayments (thinking about starting a family) so are looking at 5 year fixed deals. After doing some initial research the HSBC looked like doing the best deal for that type of product and got a quote on Saturday (5.63%).

Now this is where I’m a bit confused! The total borrowing with HSBC was quoted over 25 years which would mean we would pay back interest on the outstanding amount we have currently and the new borrowing over 25 years.

If we stuck with Nationwide I think we would port the existing mortgage to the new property and then have a new mortgage for the extra borrowing we needed so the £61,500 would still be over 21 years. Does that mean that pretty much regardless of the better rate the HSBC could offer we’d be better off doing that as otherwise we’d be paying 4 years worth of interest again?

silvercar

interest only or repayment?

interest only doesn't make a difference as the payments will be the same.

repayment would give you higher monthly payments over 21 years than 25, but overall you would be paying less interest. Another option would be to take the mortgage over 25 years but aim to make overpayments to finish the mortgage early.

DaiGonzales

Thanks for your response.

It is a repayment.

If I've understood you correctly there will be a difference in monthly payments even though in the long run the interest paid would be less.

So monthly payments on £61,500 over 21 years and £71,000 over 25 years

are likely to be more than the total

£132,500 over 25 years.

So if we can afford the monthly payments better to go with the first option.

silvercar

At 6%, £61.5k for 21 yrs is 435.64, 71k for 25 years is £462.84 total = £898.48. (total paid = 248633)

At 6% again, £132,500 for 25 years is £863.75 (total paid = 259125)

If you took the second deal and overpayed your mortgage by £40 a month, the mortgage would finish after about 22.5 years and you would save about £15,000 off the total paid. So this is another option if your deal allows overpayments.

Clearly different interest rates make a difference and you are unlikely (unless you choose a full term deal) to keep you mortgage on the same deal with the same lender for the whole time.

brock-cruse

Hi
What normally happens when you sell and buy is that you actually pay off your previous mortgage with the proceeds of the sale. This is therefore a time that most people shop around for a better mortgage deal. So if I am right you are looking to borrow approx 132k. Even if you stay with the Nationwide or go with HSBC you dont keep part of your mortgage at 21 years and another part at 25 years. You decide how long you want your mortgage to run for. If you dont like the idea of going back to 25 years then ask HSBC and Nationwide to do you monthly quotes for eg 20 years and then you can compare the monthly payements to each other as well as compare to 25 years (bear in mind any arrangement fees too though).
Think I am right in saying this but if not someone will tell me!Hope this helps!

DaiGonzales

Thanks again for the replies.

The last time we talked to Nationwide about remortgaging they said it was essentially as though we would have 2 mortgages on separate rates. One for the remainder of the original amount and original term (which is on a fixed deal due to finish in Dec '08) and a new one for the additional amount for whatever new term we wanted.

The way I was looking at this is that we have paid 4 years worth of interest on the original mortgage of £68,000.

So something like £400 monthly payment x 12 (months) x 4 (years) = £19200

Our mortgage is now £61,500.

So £19,200 - (£68,000 orignal amount - £61,500 current amount) = £12700 which is the amount of interest paid over those 4 years.

This is something we don't want to pay again so I assume to avoid this we would need to reduce the term with the new lender and pay higher monthly amounts or overpay as suggested. Think I've got it into my (somewhat slow) head now!

DaiGonzales

Silvercar,

Sorry forgot to ask how you calculated your figures?

At 6%, £61.5k for 21 yrs is 435.64, 71k for 25 years is £462.84 total = £898.48. (total paid = 248633)

At 6% again, £132,500 for 25 years is £863.75 (total paid = 259125)