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ezekiel

Re-mortgaging - What Would You Do?

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Hi

I'm remortgaging and am interested in what you guys think.

Would you go for 10 year fixed offset (at 6.2% with HSBC) or go for regular 2-3 year discounted deals.

My situation (I hear you ask) is OK-good income prospects (I'd expect pay rises of 10-20% in the next year, 5% after that but with good chances of a £10k bonus) with a current discounted mortgage ending in January. Cash situation is OK right now but we'll be looking at an extra £400 a month in January which the pay rises and my wife's increased income should cover but it would be good to keep some of that extra bunce.

So I either fix myself in, pay more but have certainty or....

hope interest rates don't go up (which I think they will but the swap rates appear to indicate otherwise), pay less on a discount and re-mortgage every few years.

My one rule is that I'm not paying anyone any application fee of more than £100.

Suggestions welcome.

Ta

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Hi

I'm remortgaging and am interested in what you guys think.

Would you go for 10 year fixed offset (at 6.2% with HSBC) or go for regular 2-3 year discounted deals.

My situation (I hear you ask) is OK-good income prospects (I'd expect pay rises of 10-20% in the next year, 5% after that but with good chances of a £10k bonus) with a current discounted mortgage ending in January. Cash situation is OK right now but we'll be looking at an extra £400 a month in January which the pay rises and my wife's increased income should cover but it would be good to keep some of that extra bunce.

So I either fix myself in, pay more but have certainty or....

hope interest rates don't go up (which I think they will but the swap rates appear to indicate otherwise), pay less on a discount and re-mortgage every few years.

My one rule is that I'm not paying anyone any application fee of more than £100.

Suggestions welcome.

Ta

Suggest you are going to get some grief on this site.

Edited by pimperne1

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Hi

I'm remortgaging and am interested in what you guys think.

Would you go for 10 year fixed offset (at 6.2% with HSBC) or go for regular 2-3 year discounted deals.

My situation (I hear you ask) is OK-good income prospects (I'd expect pay rises of 10-20% in the next year, 5% after that but with good chances of a £10k bonus) with a current discounted mortgage ending in January. Cash situation is OK right now but we'll be looking at an extra £400 a month in January which the pay rises and my wife's increased income should cover but it would be good to keep some of that extra bunce.

So I either fix myself in, pay more but have certainty or....

hope interest rates don't go up (which I think they will but the swap rates appear to indicate otherwise), pay less on a discount and re-mortgage every few years.

My one rule is that I'm not paying anyone any application fee of more than £100.

Suggestions welcome.

Ta

Cov BS are doing a 10-year offset at 5.99%. Added advantage is no tie-in beyond year 5.

Best,

Monty

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Cov BS are doing a 10-year offset at 5.99%. Added advantage is no tie-in beyond year 5.

Best,

Monty

go to here and do a search on your criteria

contact the lender directly

tell them that as you are not applying through a mortgage adviser then you don't intend to pay the arrangement fee - depending upon your credit history they will either compromise or tell you where to stick it

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Hi

I'm remortgaging and am interested in what you guys think.

Would you go for 10 year fixed offset (at 6.2% with HSBC) or go for regular 2-3 year discounted deals.

My one rule is that I'm not paying anyone any application fee of more than £100.

Suggestions welcome.

Ta

How much savings do you have? The rule of thumb is if you don't have about 20% of the mortgage in an offset then they're not worth it. If you do have a fair bit of savings why not go for a tracker offset? Britannia do one at Base Rate + 0.6% or 0.7% for the lower fee option.

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Depends how long you are going to stay in your current house for. I would say a minimum of 2/3 years to wait for a correction.

Fixed rates are coming down, which is ominous for the future prospect of interest rates.

Mines coming up for renewal end of this year too. I'm with woolwich/barclays who are offering a 0.17 above base rate tracker with no fee or redemption 60% LTV which looks tempting at the moment.

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How much savings do you have? The rule of thumb is if you don't have about 20% of the mortgage in an offset then they're not worth it. If you do have a fair bit of savings why not go for a tracker offset? Britannia do one at Base Rate + 0.6% or 0.7% for the lower fee option.

I thought it was 10%?

The rates on offsets are more competitive than they used to be as well.

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How much savings do you have? The rule of thumb is if you don't have about 20% of the mortgage in an offset then they're not worth it. If you do have a fair bit of savings why not go for a tracker offset? Britannia do one at Base Rate + 0.6% or 0.7% for the lower fee option.

OK, I'm feeling stupid now but why do you need to keep 20% in an offset. Is it because the rate of the offset is typically higher and so if you're not "off-setting" (with the additional equivalent tax breaks if you're paying 40% income tax) then you'd get beter value from a discounted rate?

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That as may be but playing the currency game with mortgages can be exceptionally dangerous.

Sorry, I wasn't suggesting anyone took out a currency mortgage. It was a comment on taking out a 10yr fix at 6.whatever%. I have no idea what the exit penalties would be, but if you did similar in Japan in the early nineties, you might have regretted it 2 years later. Or even UK if you fixed > 12%.

I don't understand why anyone takes out a long-term financial commitment, especially not on a mortgage rate.

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I don't understand why anyone takes out a long-term financial commitment, especially not on a mortgage rate.

I understand where you're coming from with that question, but the answer isn't that hard to see when it comes to fixed rates. None of us knows what's going to happen, and people who take out a longish term fix are people who are more comfortable with "the devil we know" rather than gamble on things getting better.

There's no simple right or wrong answer. Your example about Japan is perfectly valid, but it wouldn't be hard to find counter examples. We took out a 7 year fix 2 years ago. So far we've done well (the rate is 4.59%) but there's every possibility that IRs will dip again, and we'll end up losing out. In the meantime, the monthly mortgage is affordable and no amount of IR volatility will have the slightest effect. It's peace of mind -- a bit like insurance. It's easy to think that insurance is a waste of money when you don't need to make a claim. But the premium isn't really wasted at all as it's buying that peace of mind.

I would be nervous fixing for just 2 years, but it's all down to personality so nothing is universally right or wrong.

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I understand where you're coming from with that question, but the answer isn't that hard to see when it comes to fixed rates. None of us knows what's going to happen, and people who take out a longish term fix are people who are more comfortable with "the devil we know" rather than gamble on things getting better.

There's no simple right or wrong answer. Your example about Japan is perfectly valid, but it wouldn't be hard to find counter examples. We took out a 7 year fix 2 years ago. So far we've done well (the rate is 4.59%) but there's every possibility that IRs will dip again, and we'll end up losing out. In the meantime, the monthly mortgage is affordable and no amount of IR volatility will have the slightest effect. It's peace of mind -- a bit like insurance. It's easy to think that insurance is a waste of money when you don't need to make a claim. But the premium isn't really wasted at all as it's buying that peace of mind.

I would be nervous fixing for just 2 years, but it's all down to personality so nothing is universally right or wrong.

Out of interest, what sort of exit penalties are there on such a fix? Like many people I have seen enough of life's ups and downs to know that planning anything further than a few months out is an impossibility in life. So I would see a 7yr fix as a massive financial gamble, not an insurance policy. But then I know people who have taken out whole life policies, endowment policies, policies on new TV's etc etc etc for peace of mind too. What you have actually done is taken a long-term gamble with your biggest (I am guessing) single expenditure although I understand you don't see it that way.

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OK, I'm feeling stupid now but why do you need to keep 20% in an offset. Is it because the rate of the offset is typically higher and so if you're not "off-setting" (with the additional equivalent tax breaks if you're paying 40% income tax) then you'd get beter value from a discounted rate?

Exactly. As another poster said the rates on offsets are more competitive now so you may be ok with 10% but I would look at 20% as the minimum still to be sure you're better off.

I've had a current account mortgage / offset since 1999 and for me they have worked great. Never have to worry about chasing the latest high interest savings account / fixed bond etc. I'm on 6.45% at the moment and have nearly 40% offsetting. When IRs go up the fact that I'm only paying interest on 60% of the mortgage softens the blow somewhat. IR rises - bring 'em on! I'll start worrying when IRs hit 20%!

Edited by youthoftoday

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Out of interest, what sort of exit penalties are there on such a fix? Like many people I have seen enough of life's ups and downs to know that planning anything further than a few months out is an impossibility in life. So I would see a 7yr fix as a massive financial gamble, not an insurance policy. But then I know people who have taken out whole life policies, endowment policies, policies on new TV's etc etc etc for peace of mind too. What you have actually done is taken a long-term gamble with your biggest (I am guessing) single expenditure although I understand you don't see it that way.

I can't recall the exit penalty to be honest. I have a feeling there isn't one. Or not too bad. If I remember rightly it lapses part way through but I can't remember how long. My wife works for an insurance company and they have a staff deal with one of the high street banks.

You're quite right to say that it's a gamble. The thing is, doing the opposite, or doing anything else, is also a gamble. Our reasoning was this: what can we afford to pay per month without causing hardship? The figure we came up with was £1450. We then took this figure and got the shortest term at a fixed rate we could find. So all being well, the mortgage will be paid up by the end of the fix period.

If events turn out in such a way that we could have got the same deal for say £1350 a month, then too bad. It was a calculated risk, but it's a level we felt we could afford. Also, we are paying less than we would be doing with a SVR mortgage, so we are sort of banking some money to offset against rates going the other way.

I agree with you up to a point about peace of mind. Endowment policies are generally poor value, but those sales people are good. <_< TVs etc I wouldn't dream of insuring separately. Those deals are notoriously bad value for consumers.

Edited by crashtart

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if you think IRs will go up and you are living there long term - fix.

if you think they will go down then - dont fix.

Shop around and use comparison sites for the best rates and deals. Read small print carefully. Do the math, depending on your circumstances an arrangement fee might be cheaper in the long run - so why would you avoid that?! (the fees can be added to the mortgage).

Personally, im gonna prob fix for 2 or 3 years. Stability is more important to me and Im happy to pay for that - however, if a crash does happen I need to be able to move without penalty to get the upgrade! Thank God I have a while to run on 4%!

Can I recommend going with someone that allows overpayments? Use the extra income to save 1000s! Often people on here talk about saving 10s of k through timing the market right. Well thanks to overpayments and avoiding compound interest you save that kinda cash too. Even tiny overpayments save you 1000s! This also helps protect against neg equity and its great to see those repayments come down.

Or not - the higher IRs at the moment will put me back to square one. But its better than a £200 a month jump! Also, overpayments allow you payment holidays or reduced payments if times get tough in the future. I can now go a year without paying my mortgage!

GL!

Edited by Orbital

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I can't recall the exit penalty to be honest. I have a feeling there isn't one. Or not too bad. If I remember rightly it lapses part way through but I can't remember how long. My wife works for an insurance company and they have a staff deal with one of the high street banks.

You're quite right to say that it's a gamble. The thing is, doing the opposite, or doing anything else, is also a gamble. Our reasoning was this: what can we afford to pay per month without causing hardship? The figure we came up with was £1450. We then took this figure and got the shortest term at a fixed rate we could find. So all being well, the mortgage will be paid up by the end of the fix period.

If events turn out in such a way that we could have got the same deal for say £1350 a month, then too bad. It was a calculated risk, but it's a level we felt we could afford. Also, we are paying less than we would be doing with a SVR mortgage, so we are sort of banking some money to offset against rates going the other way.

I agree with you up to a point about peace of mind. Endowment policies are generally poor value, but those sales people are good. <_< TVs etc I wouldn't dream of insuring separately. Those deals are notoriously bad value for consumers.

Ok, you seem to have very strong finances and hope to pay your mortgage off in only 7 or so years. So you are in an excellent position fixed or not. I prefer as much flexibility in everything as possible. Horses for courses.

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