Soldato
I think PS was basing his value on the house being worth 190k. Just gotta hope the bank would value it at that, depending on how they do their valuation.
Mortgage Interest Rates
- Thread starter Psycho Sonny
- Start date
Soldato
Yeah that value needs the banks to agree it.
When I did a re-mortgage a while back with Nationwide, they did an arm-chair valuation based on price paid + house price index increase since purchase date, but switching to another bank would almost certainly at best be the same type of thing, or at worst be a valuation survey to establish price.
£190K might be what it would sell for today, but banks will only agree what they can rubber-stamp.
Key fact illustration should state the value and stuff if your broker sent you a copy.
When I did a re-mortgage a while back with Nationwide, they did an arm-chair valuation based on price paid + house price index increase since purchase date, but switching to another bank would almost certainly at best be the same type of thing, or at worst be a valuation survey to establish price.
£190K might be what it would sell for today, but banks will only agree what they can rubber-stamp.
Key fact illustration should state the value and stuff if your broker sent you a copy.
- Joined
- 21 Jun 2006
- Posts
- 38,372
Just locked in for 5 years at 1.24%. Currently paying 2.84% so interest will be literally halved and then some in 2 months time. Decided to stick with same lender to avoid all the hassle of switching and that was the best deal they had after running the numbers all day long on the options available.
My outstanding term was 16 years (original mortgage 21 years as a FTB) decided at these rates best to extend to 32 years. I won't be able to borrow money for cheaper than this ever again in my lifetime so best to rinse it whilst I can.
My outstanding term was 16 years (original mortgage 21 years as a FTB) decided at these rates best to extend to 32 years. I won't be able to borrow money for cheaper than this ever again in my lifetime so best to rinse it whilst I can.
Associate
Always worth questioning it as often the valuation the suggest at re-mortgage time can be influenced by things that don't make sense.. for example, a half a dozen semis near us changed hands and they tend to go for around £30-£40k less than a house like ours. Come remortgage time nationwides initial valuation of our property came back a lot lower than I anticipated.
A simple call starts the process of getting an actual valuation and just requires you to say what you think its worth and justify it.
If you are dealing with LTVS above 70% it's well worth doing as there is a fair hike in interest rates at the top end of the scale.
won’t that make the overall cost roughly the same?
- Joined
- 21 Jun 2006
- Posts
- 38,372
Only if I don't make any money off the reduced payment amount.
Let's say on a 16 year term my monthly payment is circa £1400. On the 32 year term my monthly payment is circa £900.
If I take the £500 I now have extra in my bank account (because my term has doubled) and invest it else where I can easily make circa 5-7% on it year on year compounded it doesn't really matter if I pay an extra 16 years worth of interest at 1.24% because the £500 is making much more than paying the mortgage would and the compound effect means that in 32 years time it will equal £475k with a modest 5% year on year. That is versus the £192K I would have paid to pay it off 16 years earlier. And then had say £1400 per month to invest over 16 years equaling £417k at the same 5%. I'm £50k better off so long as I stick with the plan and that's if it's only a measly 5%. I plan on making close to at least double that.
Paying 1.24% interest is nothing. So rather than overpayments on the mortgage. Investments which return far more than 1.24% mean although I pay more interest on the home. I am able to offset that through investment at least 5 times over.
That's a lot of faff to free up 500 quid. Where are you easily making 5-7%?
Last edited:
Soldato
Investments can go up and down, nowhere can guarantee that investments will outperform overpayment on a mortgage.
What you are doing is borrowing against your house to invest in the stock market. Whether this is right or wrong really is a personal decision. I personally lost interest (excuse the pun) in over paying the mortgage when rates went below 2%. Only time will tell, but it's been working out well for me so far.
Don
This is the old your mileage may vary, but certainly over the last 10 years, my investments have easily outpaced mortgage rates, by a factor of at least 3x, past performance shouldn't be taken as representative of future performance yadda yadda yadda. But with low interest rates looking to persist for years and the possibility of inflation ticking up I don't see things changing.
This may well be the case but mortgages are typically high volume. 1.2% compounded on several hundred k is still a fair chunk.
Soldato
Not that I think his approach is right in many ways but I've got a 'bog standard' stocks and shares ISA, invested in a index linked tracker fund, and its grown 16.32% in the 18 months its been open.
There are plenty of low risk funds that have performed similar or better.
As you say though, the amount on a mortgage tends to be many more times the amount of savings.
Don
Yeah, but so would the chunk of cash you've not paid into your mortgage assuming it's one or the other.
One is starting high and finishing low, so unless you've got a big chunk to start off with you need to be careful on the maths.
Don
No, it's a choice of say not borrowing another £20k against borrowing it and simultaneuosly investing £20k, if your returns on the investment are more than the cost of the interest on the £20k of debt, the fact you might have another couple of hundred k of debt doesn't really come into it.
Soldato
From some basic estimates, it's roughly 5.5% you'd have to earn year on year if you invested the extra £500 a month instead of shortening the mortgage term (using 1.5% yearly inflation). Well within the realms of possibility.
The biggest issue is that you're fixed for 5 years, not the whole term, so you've got to be pretty optimistic that after the initial 5 years that interest rates haven't gone up hugely and you end up having to fix in at a higher rate with a higher outstanding balance.
The biggest issue is that you're fixed for 5 years, not the whole term, so you've got to be pretty optimistic that after the initial 5 years that interest rates haven't gone up hugely and you end up having to fix in at a higher rate with a higher outstanding balance.
Don
Certainly it's advisable to always look at your fianances on a regular basis as the landscape changes, as well as your personal circumstance and risk appetite.
Xx
Agreed, my point was the figure you used as 20k. Unless you have that initial input value then 500 quid a month compounding from 0 is going to be tricky to make work.
Agreed.