We are more than four years into our five-year fix – a 2.69 per cent deal from Chelsea BS that expires at the end of this year.
Just before Christmas we decided that it might best to re-mortgage despite the 1 per cent final year early repayment charge – which comes to £1,994 on the mortgage balance of £199,460. We saw a five-year fix from Yorkshire BS, with a rate of 1.55 per cent and a £1,500 fee (that we would roll into the mortgage).
We thought mortgage rates had hit rock bottom and if we waited until December 2018, there will probably be two rate rises from the BoE and we would end up with a much worse deal.
On the up: The Bank of England is likely to raise the bank rate at least once this year.
Also, we would like to release £17k in equity to pay off credit card bills that we ran up on renovations to the property.
We applied for the YBS mortgage and have an offer that will expire in May. The offer is for a loan of £219,000, and the flat has been valued at £430k though we think is probably only worth £415k.
We are now thinking that £2k seems a lot to pay when we only have nine months before our deal ends.
Also, if we choose a lender that gives six months to complete on an offer then potentially we could apply in July or August – when mortgage rates will presumably be not that much different to what they are now – and complete as soon as our current deal ends.
To throw another complication in: we might sell up and move in anything from 1 to 3 years’ time. But we don’t see this as a problem as the mortgage is portable, and will be cheaper than anything we’ll get in years to come.
Are there drawbacks to porting that we aren’t considering?
One reason it is tempting to go ahead with the YBS deal is that the phone application process and provision of documents etc. was so tortuous and long-winded that we’d rather not go through it again for another five years!
Chris Lloyd, Associate Director at Enness, comments: My advice would be to go ahead with the five-year fixed rate mortgage from Yorkshire Building Society, regardless of the £1,994 early redemption charge.
Even with this fee, the re-mortgage option works out cheaper and can be ported should the borrowers decide to sell the property and move within the term.
It’s also true that if they decide to re-mortgage with the current lender, they will need to go through the application process again – so, as they’ve already been through this with Yorkshire Building Society, it’s worth continuing.
Especially as they will likely need to add an application fee to their list of charges, particularly given the £17,000 capital raise they wish to complete – which they might not even be able to secure.
If they re-mortgage now, they will start on the lower rate of 1.55 per cent – which is extremely competitive – making their monthly payments lower for the next nine months, so they’ll make some of the £1,994 fee back.
If they wait until their current mortgage has expired and rates go up, they’ll be in a much worse position, so locking in now is the best option as there are no real drawbacks to porting a mortgage.