Make Myself A Bit Clearer....

ben2444

I'm Currently a home owner on a 2 bed maisonette worth £150,000, I rent a bedroom out for £400 a month.

I earn £17000 a year plus overtime/on call of about 2-3000 so my overall income is close to £20000.

I also have a company car so I don't have to pay for my own car.

Each month I bring in about £1500 (£1100 work £400 rent), after paying my existing mortgage and other things I end up with about £500 spare which I usually over pay into the mortgage.

MY current mortgage is £110000. I am paying over the odds at 5.5%, 1% track above base rate. I want to change ASAP.

I want to re-mortgage to get a better rate. Fixed or discount, possibly 5 year rate for peace of mind.

Any advice anyone?

Ching_Ching

Hello ben2444,

Lots of questions to ask yourself:

Depends on your thoughts on what interest rates are going to do in the next year / 3 years / 5 years / 10 years.
If interest rates of 6-7-8% are not a problem, then go variable, tracker or discount. If interest rate increases would be painful and you would prefer to be sheltered from them but miss out on potential interest rate falls then go fixed.
Or capped for a mix of the two.
(You say 5.5% is over the odds, so I'm guessing a low 5-year fixed rate at 4.something is along the lines of what you have in mind.)

Depends on if you see your salary increasing significantly in the future or if you plan to stay in your current post for the next few years. You may find restrictions on overpayments as a result of increased earnings prohibitive.
Alternatively, what if the overtime dries up?
And is a not-so-unexpected windfall from a relative a possibility?

Depends on how long you want to have a lodger living with you - you may pair up with a partner or want your own space rather than have the lodger and the £400 extra per month.

Depends if you want to upgrade to perhaps a 3/4-bed house in the near future, so portability of the mortgage will be important.

Re-mortgaging from one deal to another every couple of years is getting increasingly costly in terms of fees to leave and fees to join. Longer term deals look more attractive, especially if the monthly mortgage payment is a burden already.

If you go for a 1-2 year deal, think about the next step. e.g. When your shiny new deal ends, Nationwide will let you select from all the deals they have to offer, available for new and existing customers.

Halifax/Abbey will say "Our best deals (and our pens) are for New Customers only".
You are then forced to pay a high interest rate to subsidise the shiny new deals (and pens) that are for New Customers only or you can, um, go away. :mad:

Perhaps keep the new mortgage reasonably flexible (and portable) without forfeiting a decent interest rate.
Check the small print on the deals and the redemption penalties for getting out of a deal early, some of the penalties on the top-of-the-league-table deals are shocking.

As well as committing money to the mortgage, it's wise to keep 3-6 months wages as savings in a high interest easy access account for when bad things happen and you need cash quickly. Will you need to hand back the company car and find £'sss for a private one should things change suddenly?
Perhaps fill up your tax-free cash isa allowance first, on the best rate you can find.

Life is full of surprises.

Run some numbers over x number of years on discount/fixed rate scenarios through:

http://www.moneysupermarket.com/mortgages/mortgage.asp

http://www.moneyexpert.com/Compare-Mortgages.aspx

http://www.switchwithwhich.com/mortgage/search/index.html

to name but a few.

Just the late-night thoughts of someone in a similar position to yourself.

Ching_Ching

ben2444

thanks you have given me some more things to think about...... is monthly interest calculations ok ? or would you go for daily only?

The alliance and leicester one at 4.44 % is monthly interest