Additional Borrowing - always seperate to main mortgage?

Locoblade

Hi All

We've currently got our main mortgage plus an additional £18k we borrowed a couple of years ago to build an extension. This means we currently have two "mortgages" with our current borrower Nationwide.

Speaking to First Direct tonight about remortgaging to them I assumed they'd just bundle both together as a single mortgage again but according to the person we spoke to, they have to still remortgage the two amounts seperately as part of FSA guidelines?!

If this is correct, what's the reason for the rule? For us it would be a damn sight easier and more convenient to have the entire mortgage bundled back together as one loan so we can keep track of a single account and overpay etc without having to split it out into seperate payments.

Is there any way we can request this be changed?

wymondham

When we moved from Abbey to One Account it was all put into one..... could it be the combined value of your two mortgages exceeds the value of your house?? (just guessing, i've no helpful idea's i'm afraid!!)

Toughluck

The solicitor will redeem both accounts as they will have seperate mortgage account numbers, but the new mortgage with A N Other lender should be set uo as one mortgage account.

If that is what they told you they do then that is a first and a a*s about t*t way of doing it as it would mean more admin for FD.

Locoblade

Thats what I thought, couldnt see why they'd want to do it this way from their end either. It also begs the question what would happen if we decided over the life of the mortgage to release equity a few times, would we end up with 5 or so seperate pots?!

wymondham, nope the combined amount is (just) under their 80% LTV threshold. In fact we do have that £18k still sitting in the bank as there were delays on the planning permission (now resolved - build starts next month), so with a bit of juggling we could probably even pay off the additional borrowing for now, then once the FD mortgage was set up and running, withdraw it back out again (as long as we don't go over the 80%).

BTW the house value is based on house as it is now without extension, so LTV should drop further when that's built.

I will give them a call today and find out if the original person we spoke to was talking rubbish or if it is indeed their policy.

Locoblade

Just spoken to FD again. Initially I think the chap on the other end of the phone thought we were remortgaging our initial loan, then requesting the £18k as new additional borrowing (ie we only had original mortgage with Nationwide at the mo). If this was the case I could understand them opening an additional pot to show this seperately, and evidently they have to report to the FSA/government about additional borrowing amounts and reasons for it.

I then explained this wasn't the case, that I already had my additional borrowing with Nationwide for a couple of years so in order to clear my balance with them, FD would need to pay the amount including the £18k, thereby it seems obvious they'd then put it in one pot. Apparently not though, they still insist it has to be in two seperate pots although its not actually 2 seperate mortgages.

Its not a huge issue, all we'll do is direct our overpayments onto the additional borrowing to clear that ASAP and get us back down to a single pot. The chap also said he'd pass on the comments into their customer feedback procedure, as he too could see the benefits for both us and them to have it in one pot.

dunstonh

It also begs the question what would happen if we decided over the life of the mortgage to release equity a few times, would we end up with 5 or so seperate pots?!

Yes. Each chunk could end up being on different rates and different timescales or different repayment methods.

If you ever remortgaged and the term was the same then the new lender would consolidate into one. However, the existing lender segments it as you borrow.

Locoblade

dunstonh wrote: »

Yes. Each chunk could end up being on different rates and different timescales or different repayment methods.

If you ever remortgaged and the term was the same then the new lender would consolidate into one. However, the existing lender segments it as you borrow.

Yup I understand that bit now and can see why they'd segment it off as you borrow, but in this scenario we're switching from Nationwide to FD where both my two loans will be going onto the same rate with the same term, hence why I can't undersand why they won't amalgamate them into one pot. :rolleyes:

happybroker

First Direct are a bit of a mystery to us brokers as they don't let us have access to their products but I think the guy you are speaking to perhaps doesn't know what he is talking about.

If he is correct then the FSA must have different requirements of FD than they do for all the other lenders in the market place! The joy of going direct to lender eh?

Locoblade

Its two seperate people at FD who have now said effectively the same thing, the second also checked with presumably a superior after Id explained I already had the additional lending.

Like I said, its not a biggie really, it makes no financial odds, just seemed odd. It wouldnt suprise me when its all finalised if it turns out to be a single account anyway, and the customer support people are all wrong

Woby_Tide

it could potentially be a system issue/flaw at First Direct that means that any payment they make to redeem your other mortgage, their system only allows one mortgage number to be attached to each 'new' mortgage. i.e. if they consolidate the £168k into one, then the £168k would get paid to one of your Nationwide mortgage numbers and one would receive nothing.

sdooley

So long as they aren't proposing to charge you two sets of fees!