Calculating mortgage payments/overpayments

sammyjammy

Hope I don't confuse anyone, I just want to check this is right, looking to borrow £3k on top of mortgage for roof, not sure if I want to be borrowing extra in current climate but roof may not survive another winter..... house value last year approx £124k, what its worth now is anyones guess, say £110k.

Current mortgage remaining £64114 @ 5.14%

Additional £3448 (inc fees) @ 6.39%

The two together are treated as one apparently so if I overpay it just comes off the total balance (Halifax). Using snowball calculator it says in October 09 I would owe either £57,058 with original mortgage or £60,572 if I took the extra, I used a % of 5.21% for the new total using , 5% new rate plus 95% old rate.

The difference between the two is over £3400, how can that be, I'd be repaying 800 a month (minimum required either £598 without extra or £646 with) with those figures it looks like i haven't paid anything off the top up bit?

If I'm just being thick please feel free to tell me so, in a polite manner of course.

I'm also concerned that if prices do drop 35% in the next year or so I'll struggle for a good LTV when I need to remortgage, if I stayed with Halifax and didn't borrow more money would they just let me product change without a valuation etc?

Sam

Locoblade

Nationwide certainly did this with us, and Im pretty sure its the same with other lenders, but when you take out additional borrowing the lender should set it up basically as a seperate mortgage, with 2 seperate payments going out of your bank each month, therefore you can overpay to one or the other. Obviously in your case you'd overpay on the additional borrowing as it's at a higher rate.

Also make sure there's no limits on how much you can overpay on the additional borrowing, because if its say 10% of the loan value without penalty, then you obviously won't be able to pay very much off before you start getting penalised.

Locoblade

Thinking aloud though, it not clear how much you're borrowing as you didn't put a figure in without fees, but Im guessing you meant to type £3k and the £3448 includes £448 fees? If so, thats a big fee to be paying for such a small loan amount. Either way though, if you can afford £200 a month overpayments I suspect it would be far better to get a credit card with 14-16 months interest free and put the £3k or so onto that, then pay off the £200 a month onto that. Even if you dont pay it off by the end of the 0% term, you'd have reduced the borrowing to under £1000 so may decide to either pay it off in one lump or transfer it to another 0% card and carry on paying your £200 a month until its cleared.

oibaldy

It is possible you could only end up with one payment, as you quote the current outstanding on your mortgage. If you have a repayment mortgage and have paid off some of your capital, then some lenders will quite happily re-lend you this, in effect adding your new loan on to your original mortgage. Clearly, they do this as most people will continue to pay it off slowly (ie the remaining term of their mortgage) so they make more from you.

You are best checking with the Halifax exactly how it will be set up and, as Locoblade says, check how much you can overpay without being charged.

sammyjammy

Thanks for replying, I've already checked with the Halifax, thats what they've told me, I can overpay by 10% p.a. that applies to the whole amount borrowed so its not a concern. Credit card isn't an option as I'll have to pay the roofer, Egg wouldn't touch me with a barge pole so wouldn't have a way of converting the CC into cash, I wouldn't get a CC like that anyway, I have a CCJ which although it leaves my credit record on Sep 25th (yay!) I'm too scared to apply for "good girl" credit!

You're right about the extra its £3k with 448 of fees, thats the way it is with Halifax at the moment, I know its ridiculous but I don't have many other options, if I cross my fingers and the roof goes wrong this winter then I'm in deep!

Locoblade

You can do whats called Super Balance Transfers from some credit cards, which means you can transfer the balance to your bank account, thus allowing you to pay the roofer in cash or whatever. There's usually a small fee to do this (2-3%) but way less than what you're having to pay through the mortgage. Have a look at the stoozing forum for more info on SBTs and which cards are best.

If you don't want a card, have you looked at a personal loan instead? From the difference in your two repayments of about £48 Im guessing the additional loan is over about 8 years? Even if you had to pay say 12% APR over 2 years for a regular unsecured loan, you'd still only end up paying £370 interest on top of the loan amount (i.e £3370 in total - less than your starting debt with Halifax). To pay that off over 2 years you'd only pay ~£150 a month. If you could find a loan where you could overpay the other £50 to match your current plan of £200/month overpayments, you'd only get charged about £200 interest and would pay it off in less than 18 months.