Combining 2 mortgages

JK35

Hi there, first time poster to the site and hoping someone can give me some advice!

Myself and my wife bought a new house 18 mths ago so we had to take out an additional mortgage to finance the purchase, this was a 2 year interest only fixed rate (5.29%) that ends in November 08. Total 90k. Mthly repayment £401.

This was added to the existing loan that is a fixed rate repayment deal (4.99%) that ends in April 09. Total 49k. Mthly repayment £376.

What I want to know is what is the best thing to do now?

I have emailed my lender, Bristol & West, and requested their advice as I am concerned that my payments will go through the roof on the 90k that comes to an end in Nov 08.

We have a young family so money is tight and ideally I want to fix on interest only for up to 5 years at a rate no higher than 6% meaning monthly repayments are £700 or, ideally, less.

Should I ride out the 5 mths between one deal ending and the other ending then go to whole of market or cut a deal, if they will offer me one, with Bristol & West? Perhaps even look at crashing out of the deal that ends in April 09, although I have no idea what kind of money this will cost me.

Our home was purchased for £280k and the total mortgage is £139k so we have a big amount of equity.

Hope someone can give me some advice or perhaps others have been through similar and can advise from experience.

Cheers in advance

sdooley

Waiting the 5 months means you will only pay one lot of fees, and may get a better deal.

SVR of 7.09% less your rate of 5.29% is a 1.8% difference, you pay this for five months, maybe six (6/12 x 1.8% = 0.9% x £90,000 = £810 extra interest).

£810 is not a lot to pay to be able to choose from all the deals on the market, for a long-term fix. Is that more or less than the penalty for ending your 5 year fix early?

getmore4less

One option to consider is to increase the borrowing when the first loan runs out £90k->upto £90K+£49k, if the current lender has an option you like.

Then just pay off the £49k when that deal runs out.

This way if there is a deal you realy like around Nov that gives you what you want longer term you can grab it and not risk having to mortgage the £49k later.

Funding the payments is not a big deal since you can just use the capital you have borrowed which will be sitting in good savings accounts.

Whatever you do there are risks and cost and this way you only have one lot of fees and don't need to go to the SVR so that offsets the costs of the extra borrowingas as will finding good savings accounts for the money.

There are variations borrowing intermediate amounts extra I can go into if needed. may be the LTV limits will exclude borrowing upto £188 total or have a higher rate.

dimbo61

Hi JK35
do bristol and west do offset mortgages ?
If they do and you can get a good rate then it might be possible to borrow
£90k +£49k and put the £49k into the offset, wait till the 4.99% deal
finishes in april 09 and then pay that off.
But the question that comes into my head is why change from a repayment to an interest only mortgage for the next 5 years !
If JK35 is 35 then JK will be JK40 and still owe £148k on a mortgage and still have a young family and even less time to pay off that big mortgage.
The building societies and banks also require you to have a payment vehicle to clear your mortgage before you retire ( or you have to jump through hoops )
Consider a long term fix for say 5 or even 10 years and go with repayment if at all possible. I have an offset which gives me flexibilty to overpay and save into offset accounts. GOOD LUCK

JK35

Cheers for the tips guys... am stil waiting for a response from B&W, will wait and see what they can offer me before making a decison on this one.

Reason for interest only is wife off work bringing up kids so obviously cash is short at the moment.

Am hoping rates will continue to drop and as we have a good LTV will be able to secure a better deal than what is currently available, ideally a 3 year fix is what we would like.

broke_mum_of_three

I am in a similar position, I moved house last year and ported my mortgage over which was £65k and borrowed an additional £70k total mortgage £135k.
£65k has just finished a fixed rate of 5.19%
£70k has 3 more years to run at 5.69%
I was panicking about the 65K coming to an end to see what deal I could get with the A&L. All the deals they offered me, which had product fees were all more than the base rate +1% that they told me my current mortgage would transfer to when the deal ran out in June. So I stuck with that and although the payments went up by £60 per month it didnt cost me anything.
The problem being that no other company will take on one of the loans as they will only take on my whole mortgage, so I am stuck with A&L for another 3 years keeping an eye out incase A&L do bring out any better fixed rates which are better than base rate +1%.
Hope this makes a bit of sense.

JK35

So you are waiting for the 3 year fixed to come to an end and then go to whole of market with a mortgage of 135k?

With the other amt on the SVR?

Its what I am thinking is probably best for me, can I pay interest only for the 5 mths though?

JK35

Spoken to B&W and they have advised me that I can switch the 49k to interest only at any time for a £25 admin charge

That way I can manage the repayments until the end of April 09 then go to 'whole of market' brokers and see what they can get me, perhaps part repayment part interest only, as I dont want mthly repayments to exceed £700

Any particular brokers or websites that I can scan for deals that people can recommend?