Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • fatrab
    • By fatrab 7th Feb 18, 11:15 AM
    • 857Posts
    • 2,205Thanks
    fatrab
    Re-mortgaging this year
    • #1
    • 7th Feb 18, 11:15 AM
    Re-mortgaging this year 7th Feb 18 at 11:15 AM
    Hi, I'm due to remortgage in September at the end of my current 5 year fix at 3.14%. Currently 801/month. I have been making irregular overpayments over the 5 years.

    By September I expect to have under 7 years and under 60,000 remaining. The property value was 128,000 5 years ago (this may have increased slightly) giving an LTV of around 47%.

    I want to be completely debt & mortgage free in 5 years.

    I don't expect to be able to make many overpayments for the next 2 years if I take a new mortgage with similar monthly payments, as I'm focussing on other small debts first, but then in years 3 to 5 I should be in a position to overpay considerably, way in excess of the 10% normally allowed.

    So my question is, should I be looking at either:
    1 - the cheapest possible 2 year fix/7 year term, then remortgage again in 2 years time
    2 - a 5 year fix/7 year term and overpay the maximum/save as much as possible to pay off at the end of 5 years
    3 - a 5 year fix over a longer term (10 years) giving lower monthly payments but a better opportunity to overpay throughout the term and save as much as possible to pay off at the end of 5 years.

    Or is there a better way?

    Any advice or opinions would be appreciated.

    Many thanks.
    Last edited by fatrab; 07-02-2018 at 12:29 PM.
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 11/30 AFDs
    39 x 2 coins (#32)
Page 1
    • ian310567
    • By ian310567 7th Feb 18, 3:46 PM
    • 12 Posts
    • 6 Thanks
    ian310567
    • #2
    • 7th Feb 18, 3:46 PM
    • #2
    • 7th Feb 18, 3:46 PM
    I would go for option 2, your monthly repayments should be roughly the same as they are now and you would be protected from rate increases for the next 5 years, potentially being able to clear the debt by the end with overpayments.


    Also, the rate differential between 2, 3 and 5 year fixed rates are not currently that great and you would not incur re-mortgage fees in two years time (if applicable).
    Smile and be happy, things can usually get worse!
    • fatrab
    • By fatrab 8th Feb 18, 7:16 AM
    • 857 Posts
    • 2,205 Thanks
    fatrab
    • #3
    • 8th Feb 18, 7:16 AM
    • #3
    • 8th Feb 18, 7:16 AM
    Thanks Ian,


    On paper I agree it looks the better option but because I am not going to be able to take advantage of the 10% overpayment allowance in the first two years I wondered if one of the other options made more sense. Whether the short term gain would offset the lack of overpayments?


    My only other option would be to take the 60,000 over a 5 year fix, but this would take my payments up to around 1050 and I'm not sure that would pass the stress test.


    Does anyone else have any thoughts? Thanks
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 11/30 AFDs
    39 x 2 coins (#32)
    • ian310567
    • By ian310567 8th Feb 18, 9:46 AM
    • 12 Posts
    • 6 Thanks
    ian310567
    • #4
    • 8th Feb 18, 9:46 AM
    • #4
    • 8th Feb 18, 9:46 AM
    Thanks Ian,


    On paper I agree it looks the better option but because I am not going to be able to take advantage of the 10% overpayment allowance in the first two years I wondered if one of the other options made more sense. Whether the short term gain would offset the lack of overpayments?


    My only other option would be to take the 60,000 over a 5 year fix, but this would take my payments up to around 1050 and I'm not sure that would pass the stress test.


    Does anyone else have any thoughts? Thanks
    Originally posted by fatrab

    I guess this comes down to how good your crystal ball is? and your attitude to risk vs. certainty.
    Do you want to risk having a higher interest rate in two years?


    Personally, I wouldn't take the 60k over 5 years if the repayments could be a stretch, whereas being able to overpay when you want to potentially clear the debt in the same time period make more sense to me (substituting other debt payments in years 1-2 with overpayments in years 3-5?).
    Smile and be happy, things can usually get worse!
    • fatrab
    • By fatrab 8th Feb 18, 9:57 AM
    • 857 Posts
    • 2,205 Thanks
    fatrab
    • #5
    • 8th Feb 18, 9:57 AM
    • #5
    • 8th Feb 18, 9:57 AM
    Very true, I can't see interest rates rising sharply but you never know!

    I think number 2 will be my plan of action, just wanted to make sure I wasn't missing anything or making a huge mistake. I have been told that I have a lump sum (25k) coming in around 2 years but I don't want to depend on that, just incase it doesn't come through. If it does then it's plain sailing for 5 years into mortgage freedom!

    Thanks again.
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 11/30 AFDs
    39 x 2 coins (#32)
    • getmore4less
    • By getmore4less 8th Feb 18, 2:20 PM
    • 32,170 Posts
    • 19,327 Thanks
    getmore4less
    • #6
    • 8th Feb 18, 2:20 PM
    • #6
    • 8th Feb 18, 2:20 PM
    lets do the numbers.

    Hi, I'm due to remortgage in September at the end of my current 5 year fix at 3.14%. Currently 801/month. I have been making irregular overpayments over the 5 years.

    By September I expect to have under 7 years and under 60,000 remaining. The property value was 128,000 5 years ago (this may have increased slightly) giving an LTV of around 47%.

    OK <50% LTV and 60k over 7 years as the starting point

    I want to be completely debt & mortgage free in 5 years.

    I don't expect to be able to make many overpayments for the next 2 years if I take a new mortgage with similar monthly payments, as I'm focussing on other small debts first, but then in years 3 to 5 I should be in a position to overpay considerably, way in excess of the 10% normally allowed.

    lets go with 2 years at 800pm

    So my question is, should I be looking at either:
    1 - the cheapest possible 2 year fix/7 year term, then remortgage again in 2 years time

    sounds good

    2 - a 5 year fix/7 year term and overpay the maximum/save as much as possible to pay off at the end of 5 years

    also an option.

    3 - a 5 year fix over a longer term (10 years) giving lower monthly payments but a better opportunity to overpay throughout the term and save as much as possible to pay off at the end of 5 years.

    changing term will require full application and not just a retention deal

    Or is there a better way?

    Any advice or opinions would be appreciated.

    Many thanks.
    Originally posted by fatrab
    your rate options should be good @ <50% LTV but lets start with the current rate

    60,000 @ 3.14% 7 years 796.59pm interest 6,914

    you say you can afford 800pm

    60,000 @ 3.14% 800pm interest 6,880

    looking at Santander retention rates for 2y and 5 y

    2y 1.64% 0
    2y 1.29% 999
    5y 2.04% 0
    5y 1.79% 999

    They become with a 7 year term
    60,000 1.64% 756.56pm interest 3,550
    60,999 1.29% 759.85pm interest 2,828
    60,000 2.04% 767.11pm interest 4,436
    60,999 1.79% 773.16pm interest 3,947.

    plugging in 800pm which is within the 10% limit then looking at the 2 and 5 year position.

    60,000 1.64% 800pm 42,494
    60,999 1.29% 800pm 43,153
    60,000 2.04% 800pm 42,916 15,949
    60,999 1.79% 800pm 43,688 16,531

    the no fee options are the best so that leaves us with

    60,000 1.64% 800pm 42,494
    60,000 2.04% 800pm 42,916 15,949

    At Y2 the 5y fix will cost around 400 more than the 2y fix.

    At the end of the 2y deal you need a rate of 2.52% or better to match the 5y.

    If rates stayed the same and you did the 3 years at 1.64% the interest would be 1,442 about 400 lower than the cost of the 5y in the same period.

    the risk you are trading by going for the 2y over the 5 is rates won't go up by more than around 1% over the 2 years against a potential saving of around 800 if they stay the same


    But as you want to overpay and get the term down to 5y total.

    your 5y fix will start at
    42,916 2.04% 800pm interest 1,833

    To pay it off in 5 years you need

    42,916 2.04% 1230pm interest 1,363

    That 400+ pm will be more than the 10% but if rates have gone up there should be savings rates available at close to or better than the mortgage rate anyway.


    The bottom line is the difference in cost is going to be around one mortgage payment over 5 years.

    One option at the 2year point if debt free is to find money at less than the mortgage rate and stooze.
    A long term 0% purchase CC might be an option to squeeze down the interest costs.

    if you have any debts at higher rates than the mortgage pay them first and if similar to the mortgage(or a bit less) but will take longer than the mortgage change date do the cashflow/cost and consider stopping all mortgage overpayments.

    EDIT: 25k maybe....

    With the potential for a lump sum around 2y time that could favour the 2y fix as you can review option with the 2y

    but you weigh that against the I think rates will go up so if I fix now for 5y I can get better rates in savings at Y2.
    Last edited by getmore4less; 08-02-2018 at 2:29 PM.
    • enthusiasticsaver
    • By enthusiasticsaver 8th Feb 18, 2:29 PM
    • 6,597 Posts
    • 13,782 Thanks
    enthusiasticsaver
    • #7
    • 8th Feb 18, 2:29 PM
    • #7
    • 8th Feb 18, 2:29 PM
    I think that considering you want to be mortgage free in 5 years I would go for the cheapest option whether a 2 year or 5 year fix and aim for the maximum overpayments in years 1 to 5 which is usually 10%. Save alongside if possible to reduce the balance in 2 years time and then either go for another fixed or leave as SVR so you can overpay as much as you like.


    As the balance gets lower the interest differential will make less difference so if rates go higher in 2 years the mortgage should have reduced enough for it to make little difference.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • fatrab
    • By fatrab 8th Feb 18, 4:15 PM
    • 857 Posts
    • 2,205 Thanks
    fatrab
    • #8
    • 8th Feb 18, 4:15 PM
    • #8
    • 8th Feb 18, 4:15 PM
    Thanks getmore4less, thank you for your time putting together such a comprehensive reply.


    I plan on all my other debt being completely clear around the end of 2019. Provided there are no major hiccups along the way this should be easily achievable and I should be able to sneak in a few mortgage overpayments along the way. At the moment I have a surplus of around 900pcm which will snowball as each small debt is cleared.


    Given the uncertain news from the BoE today about interest rates I think I'll happily take my chances with a 5yr fix and make my best effort to overpay the 10% each year.


    The potential 25k would be from the sale of a property by my mother, but it depends on what she decides to do in 2 years time when the property is paid off. She had indicated that the property will be sold and the monies divided between us. She has been known to change her mind though so I'm not depending on this. It'll be a bonus if it transpires.
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 11/30 AFDs
    39 x 2 coins (#32)
    • fatrab
    • By fatrab 8th Feb 18, 4:33 PM
    • 857 Posts
    • 2,205 Thanks
    fatrab
    • #9
    • 8th Feb 18, 4:33 PM
    • #9
    • 8th Feb 18, 4:33 PM
    I think that earning from saving and/or stoozing would be worth a shout as it'll keep me amused while the mortgage trickles away.


    Re-mortgaging over 5 years would mean my overall 5 year plan will be slightly extended but I can live with that if I'm in a position where I have all the money available to pay the mortgage off at the end of the 5 years.


    Thanks for all your comments and advice, really appreciate it
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 11/30 AFDs
    39 x 2 coins (#32)
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

65Posts Today

2,585Users online

Martin's Twitter