Mortgage renewal

[Imbeingunreasonable]

Hi all,

I have been in my property two years and got one of those fixed rate deals. It is now coming to an end and the bank sent me a letter saying I can switch to one of their new deals.

If I do this (and presumably keep the same mortgage terms I am on now) I will not be subject to credit checks like I was the first time I applied for my mortgage.

So, I am just wondering if I switch to another deal with the same bank, but decrease the loan term on my mortgage (I'm looking to knock about 8 years off if I can - which does mean I will be paying more per month but I can afford it) will I have to prove my income for affordability with 12 months worth of bank statements etc? And will I have to have another credit check?

I have an appointment with the bank coming up and really would like to decrease the number of years left on my mortgage so i can pay off more quicker. I don't know whether to turn up at the bank armed with P60's and bank statements or not.

Further to all of this I have checked the House Price Index online, it looks as though my house has 'naturally' increased in value over the two year period. However I would like a new proper valuation (which I will have to pay for) as I believe my house has gone up more than the HPI because we have since had a large outhouse built, redecorated the bedrooms and put fitted furniture in and have had our bathroom redone last month. So we have added a lot more value to the house so it will give me a better LTV at renewal time.

Basically I just want to know can the bank easily switch my mortgage complete with brand new terms without all the hassle of 12 months worth of bank statements and credit checks? Or do they treat it as a new lend? I've never bought a house before this one so I've no idea.

TIA

I would fix in and overpay to reduce the term. If you amend the term you will have to have another credit check.

We've done this and topped it up to our initial payment amount (so first 3 years were £800pcm, dropped to £550pcm with new deal, we still pay £800) and we should be mortgage free 11 years early.

Oh wow, thanks glitter I didn't know you could do this. I was hoping to get a 5 year fixed term on a better rate than I'm currently on, but I will look in to overpaying to try to reduce the term.

May I ask how you would go about setting that up? One would guess you would have to pay the same amount as a DD every month?

Check the terms as there's usually an amount (normally 10%) you can overpay without penalties.

I then rang up our mortgage provider and bank and amended our direct debit to the higher amount. Ours is deducted from the day received so make sure you check this (rather than it accumulates and is paid off in one chunk as you'll be paying daily interest on your mortgage).

I can ring up and add more/reduce it whenever I want as well.

It's also helpful that it can be used later on so if circumstances changed it can be used as a buffer with our provider.

With the ltv they make just amend it using the recent sold prices and your changes to the house. Often the ltv won't make a massive difference this early on by worth a try. If they have to come out and revalue it there may be a charge as well.

Also a 5 year will have a higher interest percentage than a 2/3 year etc but with Brexit etc I personally would lock in till the dust settles etc.

We're locked for three years (2 left) and will be hoping to do another 5 and then look to switch to 1 years etc dependant on the market.

Have you considered an offset mortgage? Might be an option for you?

glitter Brexit has influenced my decision to lock in for 5 years, plus the rates if I switch to one of these deals are reasonable. Its the length of my term that annoys me.

There's a handy tool online on Money Saving Expert I think which lets you see what your term and savings on interest would be if you overpaid each month so I have to admit this looks really tempting.

An offset mortgage Shots? is that where you offset any savings against the balance of your mortgage? I could look into it but i haven't too much in the way of savings - If I lost my job I could afford my life for 3-4 months before I was up the creek.

Yup glitter, I have checked and my current mortgage plan lets me pay 10% of the house value in overpayments so it's definitely do-able :D. If I switch to a new deal (keep terms the same) I should be bale to overpay on that too.

I feel like a fish out of water when looking into housing finances and stuff. I put some figures into a calculator online for comparing an offset mortgage - the rates weren't that great.

@Imbeingunreasonable An offset mortgage Shots? is that where you offset any savings against the balance of your mortgage? I could look into it but i haven't too much in the way of savings - If I lost my job I could afford my life for 3-4 months before I was up the creek.

Yes that's the one. I just thought, as you are planning to overpay, and most fixed term deals are limited on what you can overpay (often about 10% of the monthly sum). Might be a way to "pay" the overpayments into the savings. And if things do go south, you have that reserve to call back on too. I don't think you necessarily need to start with a huge lump sum - but of course you can run the numbers for your own circs.

Thanks shots - I may well mention it when I have my bank appointment to see if they can give a bit more info and what rates they offer etc.

Yes fix and just overpay that's what we do with Nationwide, we are still effectively reducing the term but still have the flexibility to not overpay just in case.

We also overpay, we've got another 2 years of our initial 5 year fix left and for the last year have been overpaying by £200 a month. This way we're reducing our term but we can amend the direct debit any time we need to do if money gets tight we can cancel the overpayment which you wouldn't be able to do if you'd renegotiated your mortgage.

Have you checked the overpayment calculator Martin Lewis has? www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator If we overpay by £200 a month then we'll have paid our mortgage back over 13 years rather than 19 years. As it stands we don't think we'll be in this property for another 10 years so we're using it as a way to build up our equity.

The last time our fixed deal ended we still had to go through the whole affordability check process ever though we were just going with a new deal with the same provider. It was a nightmare and really time consuming. That was three years ago, so I don't know it it's changed.

It might be worth getting a mortgage broker to get the best deal for you? We did that recently - had to provide all the bank statements etc. but he was much easier to deal with than direct with the bank and ultimately got us a much better rate than I had found online.

Doctor was the affordability check due to changing the terms of the mortgage? Or did you keep the same terms? My current mortgage means I'll be 64 by the time I've paid it off so I'm desperately looking to reduce this.

Thanks Clara I used that tool, it was really handy because I know how much i can afford to overpay by each month without feeling it and it brought a smile to my face seeing the years and the interest payments reduce

To be honest, I wish I'd have overpaid sooner

I'm like you, only started overpaying when I fixed a new rate, 2 years into my mortgage.

I mildly regret not overpaying sooner, but better late than never! My brother has paid interest-only for 5 years! He regrets that now. To catch up, he's now having to pay 2x what his original repayments would've been.

Yes same terms I think. Do you mean re number of years? Apols if this is something you already know, but if you switch provider you don't have to increase back up to 25 years or whatever. You can still have the same number of years (to finish when 64) or less if you can afford to cut it. My mortgage broker also advised fixing at x years and then overpaying it to reduce.

I'd honestly recommend speaking to a decent mortgage broker. We didn't pay any fees and he found us a much better deal than I could on my own. Even if it saves £30 a month or whatever then that's £30 you could put towards overpaying. Overpaying to reduce your mortgage instead of shortening the term now means if you have an unexpected bill one month or something you're not committed to it. Also, overpaying reduces the capital which can help the LTV rate next time you're looking for a deal.

Thanks Doctor yes I was hoping to reduce the number of years. My house will have gone up in value so I was hoping to fall into the next LTV bracket and get a better interest rate with reduced number of years.

Failing that like you say there's the option of fixing in for 5 years and overpaying to decrease the number of years. My mortgage advisor who sourced my mortgage for me originally was brilliant so if the bank isn't to helpful I can always go back to him.

Looks like I'll be keeping the same terms but overpaying. I'm waiting to have the house revalued to try and shift the mortgage into another LTV bracket. It would mean lower monthly mortgage repayments but hoping to overpay over the next 5 years. Fingers crossed for valuation