£1.50 for every £1 borrowed...
Discussion
I am just about to fix in again for 2 years with our existing mortage provider. Our initial 2 year fixed period has come to an end.
They seem to have offered a deal that is very good, reducing our rate from 1.69% to 1.54% for the next 2 years. They have also taken 2 years off the remaining term, and we also taking 10k cash out for home improvements. This is going to cost us an extra 100 quid a month so all in all seems quite good.
However as I have been perusing the paperwork, the total amount repayable ( obviously that will change as the term progresses and we re fix and look at different products ) seems huge, much more than the amount borrowed, and it states that we are paying back 1.50 for every 1 borrowed. Unless I am having a moment that means I am paying 50% of each pound back? Its all repayment, and it gives an APRC of 3.4%. This is the first time I have taken on a new mortgage deal on my own without the assistance of a mortgage advisor which is maybe why these figures are not ones I am used to.
Another thing that puts the fear of god into me is the "if the interest rate rose to 10.99% your payment would increase to xxxxx". On that basis, if interest rates rose to 3% we wouldnt be able to afford the repaymens, or would certainly have a major struggle on our hands.10.99% is way above anything we could ever afford. In fact thew payment alone would equate to pretty much our full joint income.
Am I over thinking this?
They seem to have offered a deal that is very good, reducing our rate from 1.69% to 1.54% for the next 2 years. They have also taken 2 years off the remaining term, and we also taking 10k cash out for home improvements. This is going to cost us an extra 100 quid a month so all in all seems quite good.
However as I have been perusing the paperwork, the total amount repayable ( obviously that will change as the term progresses and we re fix and look at different products ) seems huge, much more than the amount borrowed, and it states that we are paying back 1.50 for every 1 borrowed. Unless I am having a moment that means I am paying 50% of each pound back? Its all repayment, and it gives an APRC of 3.4%. This is the first time I have taken on a new mortgage deal on my own without the assistance of a mortgage advisor which is maybe why these figures are not ones I am used to.
Another thing that puts the fear of god into me is the "if the interest rate rose to 10.99% your payment would increase to xxxxx". On that basis, if interest rates rose to 3% we wouldnt be able to afford the repaymens, or would certainly have a major struggle on our hands.10.99% is way above anything we could ever afford. In fact thew payment alone would equate to pretty much our full joint income.
Am I over thinking this?
I guess the lower interest rate offered on the 2 year fixed appeals, as I think a 5 year fixed with same bank ( Halifax ) sees the rate rise by around 2%.
They did say that the total amount repayable was based on the SVR switch which as has been mentioned, we would look to avoid anyway. This re mortgage has no product fee, another attraction to it.
Re the rate rises, we could manage a rise of a few percent, but wouldn't want to ideally. We are at the point in life where our outgoings are high with young kids, that said, that cost wil reduce in a few months as they are of schooling age now, so yes we could pay a few hundred more if we really had to but I don't relish the thought. But anything over 5% and I would say we are knackered. But I would presume a rate rise of 5% would knacker most of the population the way things are at the moment.
They did say that the total amount repayable was based on the SVR switch which as has been mentioned, we would look to avoid anyway. This re mortgage has no product fee, another attraction to it.
Re the rate rises, we could manage a rise of a few percent, but wouldn't want to ideally. We are at the point in life where our outgoings are high with young kids, that said, that cost wil reduce in a few months as they are of schooling age now, so yes we could pay a few hundred more if we really had to but I don't relish the thought. But anything over 5% and I would say we are knackered. But I would presume a rate rise of 5% would knacker most of the population the way things are at the moment.
Wacky Racer said:
Mortgage rates rose to 15% briefly around 1991, people today paying rates less than 3% don't know they are born...
Make hay while the sun shines....
I know, a fact my mother keeps telling me about and has done since 2004. But are they really likely to ride to that level again - if they did, surely around three quarters of the country would be homeless?Make hay while the sun shines....
Sheepshanks said:
Amounts
Broadly speaking we pay 1k a month at the moment, and have chosen to up that to around 1100 amonth with the extra cash, which we will use it pay off a car PCP which has reached the 3 year balloon plus install a new boiler, so worthwhile spending or at least we think.Edited by Sheepshanks on Monday 17th July 10:07
The fine print suggests if rates hit 11% we would be looking at £2800 a month - scary prospect and not one we could entertain - thats almost 3 x our current monthly payment.
Bigger mortgage amount and a longer term than yours. But it def quotes the monthly payment of 2800 if rates hit 10.99%.
The cash we are taking out is on two seperate loans of 5k each. So on paper there are 3 seperate parts to the proposed new mortgage - new mortgage, 5k loan and 5k loan. One of the loans is payable within 10 years, the other two are for the remaining new term of 26 years.
The cash we are taking out is on two seperate loans of 5k each. So on paper there are 3 seperate parts to the proposed new mortgage - new mortgage, 5k loan and 5k loan. One of the loans is payable within 10 years, the other two are for the remaining new term of 26 years.
Some interesting food for thought here.
I have never overpaid my mortgage, I probably could have in the past, but certainly not now. We are very much in the "just think about what you pay each month" camp, I have never really considered anything more, and I must say I don't know of anyone else who has. With the jobs we both do, our wages will never rise (in fact they have been going down for the past 8 years) so there is no hope of ever being able to do anything other than paying a monthly payment.
The only way of us ever coming into more money than the flat wages we take home each month is if we were to inherit or win the lottery. We don't play the lottery and our inheritance will be a pittance as there is no money with what relatives we have left. I lost direct family many years ago and didn't inherit a penny as his new wife (fourth marriage) ran away with his accumulated wealth and property the day after the funeral.
We just have to bat on and try and re fix every few years, reducing the term if we can. I had some savings which are now dwindling as we are dipping into them to cover costs that we can no longer cover, mostly house maintenance. I can no longer save either so am being very careful with what I am spending my savings on.
We probably have a buffer if rates increase but it would mean just eating baked beans on toast and walking around insocks with holes in them. Yes we could do it, but not ideal.
I have never overpaid my mortgage, I probably could have in the past, but certainly not now. We are very much in the "just think about what you pay each month" camp, I have never really considered anything more, and I must say I don't know of anyone else who has. With the jobs we both do, our wages will never rise (in fact they have been going down for the past 8 years) so there is no hope of ever being able to do anything other than paying a monthly payment.
The only way of us ever coming into more money than the flat wages we take home each month is if we were to inherit or win the lottery. We don't play the lottery and our inheritance will be a pittance as there is no money with what relatives we have left. I lost direct family many years ago and didn't inherit a penny as his new wife (fourth marriage) ran away with his accumulated wealth and property the day after the funeral.
We just have to bat on and try and re fix every few years, reducing the term if we can. I had some savings which are now dwindling as we are dipping into them to cover costs that we can no longer cover, mostly house maintenance. I can no longer save either so am being very careful with what I am spending my savings on.
We probably have a buffer if rates increase but it would mean just eating baked beans on toast and walking around insocks with holes in them. Yes we could do it, but not ideal.
okgo said:
Nearly everyone can upskill/earn more.
While your situation probably isn't unusual, there are certainly ways to make it easier I should think. It does make your spending on expensive bikes seem mental though!
You have always said that, and often you have said "just get a new job". I have always thought that based on these remarks, you must be hugely naive. If it were that easy, everyone would just "go out and earn more money", which doesn't happen. My situation is like all those that I work with, we are stuck in a public sector pay and conditions rut, with absolutely nothing to offer in the way of skills or experience. I could re train from scratch of course, however, that would mean around 5 years ish of trying to work my way up in a new career with no guarantee's. With two dependants and a huge mortgage, that isn't an option, plus I am cautious and uncomfortable with leaving the safety net I have been accustomed to over the past 16 working years, so for now at least, I will stick it out.While your situation probably isn't unusual, there are certainly ways to make it easier I should think. It does make your spending on expensive bikes seem mental though!
As for the bikes, they have always been affordable, as I am very careful with what I spend. You know nothing about my financial situation or what cash I had available at the time of purchase, plus you don't know whether I have a lump of cash sat in the bank which I have built up over the years. Has it occurred to you that I may have been putting away money each month since I started work?
Things seem very simple in you work of "just doing" things but the majority of people have complex lives, especially when they have young kids and difficult jobs.
mjb1 said:
So you would never consider overpaying your mortgage repayments, but you were happy to shorten the term by 2 years?? Makes no sense as they're both effectively the same thing - you overpay, it reduces your mortgage balance and shortens the term. The only difference is shortening the term forces you to pay more each more, at least a voluntary overpayment can suspended. But try going back to the lender and asking them to tack that extra 2 years back on the mortgage because you can't afford the monthly repayments, probably won't go down well!
So are yo saying we could leave the term at 28 years (not shortening), make an overpayment of £100 each month and then be better off for it? I didn't know this would be a better option - it just feels better to think that we are removing a couple of years from our mortgage in the long term. It is only now at the age of 35 that I feel like we should be starting to pay it off and looking to the future rather than just borrowing off it continually, which we have done over the years usually to buying/moving house or extending one. GR_TVR said:
So let's say by shortening your mortgage by 2 years your payments go up £100 a month.
If you don't shorten your mortgage and overpay by £100 it has exactly the same effect - you will knock 2 years off the term of your mortgage simply by overpaying.
The difference is, by overpaying it is a voluntary payment - if you find that for a period of time you need that £100 a month, you can simply stop paying it. Obviously the mortgage payment term would stop reducing at this point.
If you shorten the term then you have no option but to pay the £100 - even if you can't afford to.
Try googling "mortgage overpayment calculator" to try and get a feel for this.
To be honest I would prefer having to pay it rather than volunteering it. It would work better for us, we could afford it, and if we didn't have to pay it we would probably be lazy and spend the money on something else.If you don't shorten your mortgage and overpay by £100 it has exactly the same effect - you will knock 2 years off the term of your mortgage simply by overpaying.
The difference is, by overpaying it is a voluntary payment - if you find that for a period of time you need that £100 a month, you can simply stop paying it. Obviously the mortgage payment term would stop reducing at this point.
If you shorten the term then you have no option but to pay the £100 - even if you can't afford to.
Try googling "mortgage overpayment calculator" to try and get a feel for this.
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