which is the better option?

melt71

Hi all,

My partner and I are just about to apply for a mortgage to buy out my ex-husband of the house I currently live in. The house is valued at £165000 and we have agreed to buy it for £93000 (plus an additional payment of £15000 when we sell the house). My ex has already had a £32k remortgage, so this makes it about a 50/50 split.

We now need to get a £90000 mortgage sorted and we've found 2 options which do not have too many penalties if we have to sell within the next couple of years (which is quite possible).

The first is Egg; discounted for 6 months to 4.24% and then a variable rate of 5.74% for the remainder of the term (or .99% above the interest rate). The cost is £99 arrangement fee and no other charges. It is quite flexible, you can take payment breaks, overpay etc.

The second is Tesco; they have 2 discounted mortgages either for 2 or 3 years both at 4.75% and then 5.74% (or .99% above the current interest rate). Their charges are £399 arrangement fee and £25 for transfering the money to your account. They do have a redeption penalty but only whilst the discount period lasts (its 2% of the total loan) plus £195 if you change before the end of the term.

We were attracted to these mortgages because they seemed less complicated than a lot of the others we've seen, with less redeption penalties but also their standard variable rates are about 1% less than most of the others on the market.

There is one problem, I have had a voluntary repossession a couple of years ago, but I settled the debt and had an official letter from the Halifax to confirm that the debt had been settled. They also stated in the letter that they would inform the mortgage council(?) that the debt has been satisfied. I never fell into any arrears on the property beforehand. I'm not sure if this will affect the application or not? ???

Any advice on this would be greatly appreciated as we are really nervous about what choice to make.

Thanks ,

Mel

Fairdo_2

Mel

I think you have answered your own question on which of the 2 options would be best for you, if they were the only options.

You have mentioned that it would be reasonable to assume that you may want to sell within 2 years without penalty.

With this in mind, I would suggest that a Penalty Free Mortgage would be a better route for you. Unless you are happy to take your chosen mortgage with you to the next place. You are then in a position where you are stuck with that lender and tied to dealing with whatever range of products they have at the time! You must also ensure that the mortgage on offer is Portable.

With your past credit issue, a lender that might have appealed to you may have been Abbey. However, they have limited mortgages available at the moment that are Penalty Free. They have temporarily withdrawn their offset mortgage until they have made sure they comply with the new FSA (new regulation) rules.

I would say at this point that you need to bring the voluntary repossession up to the lenders you have already dealt with to make sure that they would be happy to deal with your mortagge on your own individual merits.

melt71

Thanks for your reply. I am trying to be as pessimistic as possible about a possible moving date, just in case we do have to move because of my partner’s job.

However, I think that a maximum 2 year discount may be ok, especially if the penalties end at the end of the discount term. If we really need to, we could put off the move for a few months as my partner already lives and works away for half of the week. It's a really difficult decision to make for us as we don't want to pay over the odds for our mortgage on the offchance that we have to move! but on the other hand... :P

Thanks again for your reply, we'll contact Egg and see if they will deal with me. If not, I have had a tesco savings account and credit card for years so hopefully they will look at my case more favourably!!

Mel