3 ms·

I'll speak with my lender this week. I don't think I can refinance for another few months without fees and at this point there's a significant risk in taking ou

by kypro 4y ago

I'll speak with my lender this week. I don't think I can refinance for another few months without fees and at this point there's a significant risk in taking out a longer-term fix anyway because this move could be temporary and a fix would be locking in the higher rate. There's really no good options. The right answer would have been to try to find a 10 year fix when I took out the mortgage but as I've explained in another comment they're very unfavourable for many reasons in the UK. You basically pay a premium on current market expectations for the fix and have early repayment fees were you to want to sell your home.

rdtwo 4y ago
If you lock in a high rate you can always refi down later
- kypro 4y ago
  You must live in the US lol. No, you can't do this in the UK without incurring fees. Once you take out a fix you basically lock yourself in at that rate. You cannot sell or refi without fees, which are often in excess of 5%. If rates move down a lot perhaps that would make sense in some cases, but generally it doesn't.
  - theGnuMe 4y ago
    The US has refi fees too. Whether it is worth it depends on how much longer you will stay in the house. It can be worth it if it it reduces your payment to something manageable with the option of only increasing the length of the mortgage by a little bit, i.e. borrowing the money for longer. You pay more in interest over the lifetime of the loan unless you can refi again at a lower rate. I suspect if you calculate the expected average interest rate over the length of your ownership and the fixes (2-3, 5, 10) you'll get a similar number even with higher volatility in the specific rates. But you'd have to run the numbers/math. This of course does nothing for the many 12-24 months of higher payments even if it evens out over time.
gpderetta 4y ago
I took the risk last year of taking a 5 year mortgage at 1.7% because the upside of the rates going further down was nothing compared to the risk of going up and the premium compared to 2 years was very small. I strongly suspected that the end of the good times was near, but this surpassed by expectations. It is a significant mortgate and I'm currently not excluding that rates might be in the 10% in 4 years. It is not going to be fun.

by kypro 4y ago

rdtwo 4y ago

If you lock in a high rate you can always refi down later

kypro 4y ago
You must live in the US lol. No, you can't do this in the UK without incurring fees. Once you take out a fix you basically lock yourself in at that rate. You cannot sell or refi without fees, which are often in excess of 5%. If rates move down a lot perhaps that would make sense in some cases, but generally it doesn't.
- theGnuMe 4y ago
  The US has refi fees too. Whether it is worth it depends on how much longer you will stay in the house. It can be worth it if it it reduces your payment to something manageable with the option of only increasing the length of the mortgage by a little bit, i.e. borrowing the money for longer. You pay more in interest over the lifetime of the loan unless you can refi again at a lower rate. I suspect if you calculate the expected average interest rate over the length of your ownership and the fixes (2-3, 5, 10) you'll get a similar number even with higher volatility in the specific rates. But you'd have to run the numbers/math. This of course does nothing for the many 12-24 months of higher payments even if it evens out over time.

gpderetta 4y ago

I took the risk last year of taking a 5 year mortgage at 1.7% because the upside of the rates going further down was nothing compared to the risk of going up and the premium compared to 2 years was very small. I strongly suspected that the end of the good times was near, but this surpassed by expectations. It is a significant mortgate and I'm currently not excluding that rates might be in the 10% in 4 years. It is not going to be fun.