Hello all the experts,
Sorry a bit long, but quite convoluted.....expert opinion sought please.
I bought a new build under an offer where the builder allowed me to defer 25%of the payment for 15 years. This was in 2006, so I have until 2021 to pay the amount off. This is not a secured loan, so I don't have to pay any monthly payments on this 25% deferred amount.(This shows up as a second charge on the house)
The property market was on the up then and the builder just wanted 25% of the market value after 15 years or of the selling price if I sold earlier.
The cost price of the house was 150K
So mortgage for 75% = 112.5K
Deferred payment amount = 37.5K
I have 100K outstanding on the mortgage part as of today.
Due to the property downturn builder is offering a 25% discount on the deferred amount. So I can get away with 28K instead of 37.5K if I pay now.
I will pay around £560 monthly on a 3.79% rate for the remaining 23 years of the mortgage term. Or thereabouts.
I can't shop around much for mortgage because most banks do not take on a mortgage with 2nd charge, even though it is deferred and I can show savings.....
I have 2 options
a) I can somehow manage the 28K to finish off the second charge.
b) I can pay the 28K to the bank(if they allow that is) and reduce my capital and hence the interest and monthly payment.
Advantage of a) is that I get rid of the 2nd charge and can shop around for competitive rates. Also it is easier to handle going forward with builder out of the picture.
Disadvantage I guess is that I am paying someone who I dont really have to pay for another 8 years. Time value of money might come into play here.
Advantage of b) is that my monthly payments will go down significantly. But disadvantage is that I won't get to shop around due to the 2nd charge.
My questions are
1. Which of the options might be better in the long term and why ?
2. If b) then are there any banks that I shop around with who will take on a 2nd charge deal ?
Any insights much appreciated.
Thanks.
Sorry a bit long, but quite convoluted.....expert opinion sought please.
I bought a new build under an offer where the builder allowed me to defer 25%of the payment for 15 years. This was in 2006, so I have until 2021 to pay the amount off. This is not a secured loan, so I don't have to pay any monthly payments on this 25% deferred amount.(This shows up as a second charge on the house)
The property market was on the up then and the builder just wanted 25% of the market value after 15 years or of the selling price if I sold earlier.
The cost price of the house was 150K
So mortgage for 75% = 112.5K
Deferred payment amount = 37.5K
I have 100K outstanding on the mortgage part as of today.
Due to the property downturn builder is offering a 25% discount on the deferred amount. So I can get away with 28K instead of 37.5K if I pay now.
I will pay around £560 monthly on a 3.79% rate for the remaining 23 years of the mortgage term. Or thereabouts.
I can't shop around much for mortgage because most banks do not take on a mortgage with 2nd charge, even though it is deferred and I can show savings.....
I have 2 options
a) I can somehow manage the 28K to finish off the second charge.
b) I can pay the 28K to the bank(if they allow that is) and reduce my capital and hence the interest and monthly payment.
Advantage of a) is that I get rid of the 2nd charge and can shop around for competitive rates. Also it is easier to handle going forward with builder out of the picture.
Disadvantage I guess is that I am paying someone who I dont really have to pay for another 8 years. Time value of money might come into play here.
Advantage of b) is that my monthly payments will go down significantly. But disadvantage is that I won't get to shop around due to the 2nd charge.
My questions are
1. Which of the options might be better in the long term and why ?
2. If b) then are there any banks that I shop around with who will take on a 2nd charge deal ?
Any insights much appreciated.
Thanks.