Remortgaging - any thoughts?

[skint]

Following on from the money saving thread, I have been taking a long hard look at our finances, and have decided that one way for us to go would be to remortgage. We have various debts (car loan, credit cards, secured loan) of about £38,000. This means that although we are both on good wages, we seem to have no money left after paying off these bills, as well as all the other. I have been taking tips from the other thread (been using only one washing powder tablet - no difference at all! ), but think we need something a bit more drastic.

Our mortgage is £70,000, the house is worth (approx) £120,000, so we have quite a bit of equity there, and it seems logical to put all the debts together, cut up the credit cards, make a strict budget and start again.
Also, our current mortgage is an endowment mortgage (only had it for 4 years), and I really like the idea of a repayment one. Looking on the "Money Supermarket" website, I've found a number of mortgages, which would leave us from £400 - £550 better off each month. Our mortgage would still only be about 90% of the value of the house, and it would be well within the maximum that banks are usually prepared to lend.

However, there must be some drawbacks - I realise that we wouldn't get anything back from the endowment, but am happy to keep it on as a (admittedly fairly poor) investment. We would obviously need to up our life / sickness / unemployment insurance, but I;m sure that wouldn't take up the £400 we would have "spare".

Another question I have is how can we get our house valued before actually applying for the mortgage? Where we live there are so many different types of houses - some are commercial (B&B), some are doctors / dentists etc, so I can't go the "compare to another similar property nearby" route. I really don't like the idea of getting an estate agent round under false pretenses, I hate lying (the embarassment of being found out), and I couldn't be bothered with the hassle of them phoning up "have you decided" etc.

So, has anyone else gone this route, are there any holes in my plan, any other helpful hints?

PS Changed my name for this one - bit embarrassed about the mess we've got ourselves in.

About 18 months ago we remortgaged, we had a redemption of 1800 and we had 15 months till it run out, but the money we saved in cheaper monthly repayments we saved that money anyway, and we even got 5000 added to our mortgage so we could pay the penalty and get some new furniture for the house and still ended up paying over a hundred a month less. Look around there are some really good deals.

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We remorgage every couple of years, getting a discounted rate each time - currenttly we're paying just less than 4% - this is less thanthe bank of England base rate! It's dead easy to do - we always get a deal where the lender pays legal and survey fees. And no it isn't too good to be true, it's just careful financial planning. This website is useful for calculating how much a repayment morgage will cost over a given no. of years: www.mortgages-direct-uk.com/calculator.html

Make sure you don't just keep extending the term of your mortgage though - you don't want to end up in 20 years time still with 20 odd years of mortgage.

We've still got our endowment too - it provides some life assurance, and although we don't suppose we'll get what it was supposed to pay out we do take some comfort in that we at least have something with which to put the children through Higher Education with.

I wouldn't worry about the valuation - just put down you think it's worth £120k - in all liklihood the surveryor will just agree with your figure.

Good luck, and remember - remorgage regularly!

Meant to say - check your/dh's work benefits - these might provide a lump sum if one of you dies so you may not need as much life assurance as you think.

Although we are in need of re-mortgaging ourselves, we were advised to take up an interest only mortgage with no penalty, which makes it effectively a flexible mortgage as you have to pay the interest minimum (didn't insist on ISA/endowment) and any extra off the capital as you have it spare. usually to pay this off at the end of the year, depending on how interest is calculated. This makes it more flexible than a repayment mortgage and you do lower your overall borrowing, but at your own pace.

The disadvantage is having the discipline to pay your savings in (and doing it at the best time to minimise interest). We will reduce our overall borrowing by remortgaging and adding our savings to reduce our capital borrowing. I hope this makes sense, I'm no IFA but this is what 2 advisors told us independently.

Had you considered the combined mortgage/current/savings account products - have a look at this article from the Motley Fool , which explains the benefits of this type of account.

We have First Direct's SmartMortgage (but there are others), which usually costs £245 to set up (though see here for how to avoid having to pay that). Your exisiting debts moved to this type of acocunt would only get charged interest at the mortgage rate (it's flexible so you can still "pay" the credit card part off by overpaying the mortgage, but the mortgage element is seperate so you shouldn't be tempted to dip into it and use it available credit) and any savings or current account balances offset your mortgage rather than earning interest (so you don't pay tax on the interest). As interest is calculated daily then any money you have in any of your accounts cuts the interest on your mortgage - unlike some accounts when it's only calculated once a year!

We swtiched to this a couple of years ago, and wouldn't switch back to a conventional mortgage now.

We remortgaged last year and one thing to remember is that most lenders won't lend on how much equity you have in the house - it will still be based on your earnings. We live in a fast rising house price area and in just over 3 years house has risen £60/70k but this made no difference to what we wanted to borrow. We used a financial adviser and he was very good and explained the jargon in terms that we could understand!!

Skint> to get an idea of how much your house is worth, it might be woth looking here; Up My Street

I am going through the process of remortgaging at the moment. This is because I need to be able to buy my ex partner out of the mortgage. I used an I.F.A. I also had to pay to get the house valued professionally by a surveyor, it cost me £150. Estate Agents can be very unrealistic and I didn't want to quibble with the ex about the value (even though he still thinks the house is worth a lot more!).

Bobbins, IME surveyors can be unrealistic too, especially if they are not local. (When we wanted to remortgage, the low valuation the surveyor put on the house meant we had to pay the extra charge for a high loan-to-valuation ratio.)

We were once genuinely considering selling and got 3 local agents in to give a valuation, which they did willingly, and their valuations were all fair and reasonably close.

My dad died last year and for his house we got 3 agents in, both to give a valuation and for an opinion on whether certain jobs we thought needed doing were vital to sell the house (one local agent wanted about £100 before they would come so we didn't bother with them.) Again the valuations and advice given were similar and fair (and free!).

Skint, if you hang on to your endowment past 6 years - I think that's the magic figure - you should get a better amount back against what you've put in. (Although ours, which was in its 20th year of 20 when we surrendered it late last year, only grew by £250 when we had paid in £500 the previous year - one of the reasons we surrendered it!)

Skint, when we got our house remortgaged, we had an estate agent come around for free, but to be honest, the bank will usually do their own valuation based on their own experts (ie based on recent sales etc) so even if you do get a valuation, the mortgage company may disregard it for their own. We have remortgaged a couple of times and it is a good option for you I think.

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The surveyor that valued my house was originally appointed by my mortgage company. I didn't have to pay for this valuation, but I had to pay for him to do this privately for my own use, so that I could send it to my solicitor. I needed it done properly because of my individual circumstances...ie disopute with ex partner. I think this would usually be unecessary and all you would need is the valuation that the mortgage company get.

When we remortgaged the survey fee was paid by the lender (or by us and remibursed by lender IIRC) but we estimated the value on the appropriate form (just a guess that would push the value of the loan we wanted below 75% in order to get a better product) and the surveyor came in at exactly the same value (£140K). Mmm - coincidence?? Actually I think we were probably conservative in our estimate but since it got us the mortgage we wanted it was pretty irrelevent.

Find a good deal offered by someone else and tell your current lender that you are considering moving. They will more than likely try to equal or beat the other offer and you won't have all the hassle of changing lenders (no valuation, surveys, credit checks etc.) My friend did this last year and halved her mortgage rate. We were on the lookout for a new fixed rate last year when the old one finished and ended up getting the best deal from our original lender with a cashback sum into the bargain. Nobody else could match it. We weren't wanting to borrow more - just get a better deal but it might work if you try.

We're thinking about sorting out our finances. Ideally, we'd like to remortgage to pay off debts and also pay to have the attic converted. I think it would cost us too much though, all together.
Since moving to this house I've gone part time. Dh's wages have gone up considerably which mean I can stay p/t so I spose our income has only gone down by about £2K. The value of the house has sky-rocketed but someone said earlier this won't make any difference, will it? Paying off the debts and a new room would cost at least £35K I reckon. Is this going to cripple us? And which would take priority, extra room or debts paid off?

Moomin, the extra equity you have from the value going up means you should easily be able to borrow the money, but the only way you can find out if you can afford it is by getting some figures from Building Socs.

There are supposed to be some great deals around at the moment though, and don't forget that you will be saving the monthly payments on the debts you will be paying off, which might even cover the increased mortgage payments. We recently surrendered an endowment which was a year off term and hardly growing at all, for 22.5K, and used the money to pay off various credit cards, a personal loan and a car loan; altogether we are paying out 600GBP less a month now. It makes a big difference!

I think having a couple of local estate agents value your property is a good idea, and I wouldn't worry about feeling dishonest. Based on the experiences I've had with estate agents they are not exactly the most honest people in the world! No offence to any honest ones out there.

Moomin, I'd pay off your debts first as otherwise you won't be able to sleep at night even if you are in your new room! Snap on the attic conversion I'm about to get mine done, but not at that price.