Northern Rock 125%

pclemison

Hi, in September 2006 we took a 125% mortgage with NR. In reality this is a 95% mortgage and £30,000 unsecured loan. We have used the loan to renovate the house. However, the value of the house has only gone up about 15% (even taking the improvements into account). We are coming to the end of our two year fixed deal now and I was looking for some advice.

At the most optomistic we have 105% (effectively) LTV. However, would it be better to take a mortgage at 80%LTV and then cover the rest under a separate unsecured loan (ie. not linked to our mortgage)? Our finances are already stretched and I'm afraid to go down the road of SVR payments this winter, not knowing whether I can afford it.

Any suggestions?

minimike2

You wont be able to get an unsecured loan for more than £25k. If you move the main mortgage and not the loan part, the rate will go up on the loan (usually to about 11% apr). There is not a lot people in your situation can do but stay on the SVR.

pclemison

As the value of the house is going up, an 80% LTV will result in about £10,000 from the original loan being transferred to the new mortgage and therefore the loan I will need will be only £20,000

HelpWhereIcan

Your theory is correct, but whether it will work in practice will be another thing.

NR's SVR is 7.49 so possible to beat even at 90% (which reduces the amount you have to re-broke as unsecured), but 80% is likely to get you a better rate.

Depending on how the unsecured figures work out, it could be best to leave the unsecured with NR (yes, even at 13%) due to the term the loan is over. It is completely flexible so you can make overpayments as and when affordable.

Depends on the rate you can get a new unsecured loan for and you may have to play with the term the mortgage and loan are put over, but many people can beat staying on SVR (or at least get some security by fixing some) with a bit of lateral thinking assuming a good credit history.

You may be better remortgaging for 90% to take advantage of a longer term than most unsecured loans (generally 7 years max) even though the rate on the mortgage would be higher than at 80%.

Depends on figures involved, but a mortgage broker should be able to do the figures for you.

have a look at http://www.moneyfacts.co.uk/searches/mortgage.aspx and http://www.moneyfacts.co.uk/searches/loan.aspx to get an idea of what may be available and to play with the figures to see how it would work out.

Use an online calculator to work out the payment on the Northern Rock unsecured section assuming you leave it with them at 13% over its existing term eg over 25 years, 20k @ 13% would be approx £225.57 pm.

If you are not confident in making the choice yourself, need further advice or want someone to take the hassle away from you get some advice from a whole of market broker.

Ideally use personal reccomendations to pick one or even something like the Yellow pages etc. No harm in speaking to more than one and always make sure to ask the questions Martin suggests in http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1101649966,86816#step2.

Be careful of anyone who approaches you unsolicited and use the services of a face to face adviser unless you are confident enough to deal with someone via post & email.

Hope this helps

Good Luck

minimike2

Ahh right ok i am with you.

You need to sit down and work the figures out nased on what mortgage deals are available.....a £20k unsecured loan you are looking at 7 year term max with most providers, so cost there will increase each month (but will be cheaper in the long run). So you need to see what the mortgage and loan would cost, compared to staying on SVR. Visit to a broker would be a good start.

I would also make sure that you know the actual value of the house....it might not be worth what you think in the current climate.

poppy10_2

pclemison wrote: »

As the value of the house is going up

Is it? Is it really, though?

Both Halifax and Nationwide say house prices are back down to June 2006 levels, and you bought in September 2006. Even taking into account your home improvements, your figures don't add up.

pclemison

apologies... when I said that the price of the property was going up, I meant has gone up (i.e. since I bought it), based on improvements and adding an additional bedroom to the property.