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MORTGAGE / LIBOR / National Guarantee

hi all.

i have been having problems getting a remortgage since i had arrears (now cleared) about 6 months ago.

I had a guy out today from National Guarantee. The are confident they can get me remortgage with GM but the rate referred to LIBOR which is a term I am not familiar with. He did agree they werent that cheap but said i dont have alot of choice because of my arrears.

A google on Libor mentioned it being a benchmark for short term lending. (Its a 20 year mortgage)

The rates quoted were a touch high i think, its a 3 year tie in and after the 1 yr intro rate of about 5% it goes to 6.5% which is variable at a percentage (2.5 i believe) above LIBOR

I dont know much about finance (relative to some of you guys) so I wondered if you would give me your comments.

It is 50% LTV remortgage.

I am thinking of proceeding but didnt want to do anything CRAZY!!

I wish I had paid my mortgage on time last year, i dodnt realise at the time the damage i was doing by letting the payments build up then paying.

The advisor recommended remortgage as soon as 3 years tie in ends by which time my arrears would be 4 years old...

look forward to hearing from you

sean

Reply to
connections cardiff
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In message , connections cardiff writes

London Inter Bank Offer Rate is the wholesale price of money. It is lent in tranches for fixed periods, from a short as one day to many years. The original loan period was three months which is reflected, these days, by three month treasury bills.

A LIBOR linked loan will usually be linked to the 3 month libor rate. The rate quoted is 'per annum' not for 'three months'.

So, you borrow £100,000 at 1 over LIBOR, and if the three month libor rate negotiated by your lender is 4.045, then you pay 5.045% per annum fixed for three months. At the end of the three months your lender negotiates another three months at whatever rate he can get in the market which may then by 3.875, so you pay 4.875% per annum for the next three months, and so on. The Lender is likely to be big enough not to go and borrow dosh just to lend to you, so it will charge you its cost of three month funds that it is currently obtaining on the market.

This kind of lending is the way bank lending started out, by discounting three month bills of exchange. Daily interest calculations and overdrafts are relatively modern things in the whole scheme of things.

In your particular case it seems quite a good deal and you are not being ripped off, expensive, yes, but rip off - no.

Reply to
john boyle
[snip]

thanks john, your ubiased advice is appreciated.

Reply to
connections cardiff

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