Advice plse: Have to remort by end of Jan

Remortgage06

I am looking for some advice on our situation:

We currently have a mortgage of £132k with the Halifax which has been fixed at 4.25% for the past 2 years, 24 years left on mortgage. This deal expires at the end of January. Current mortgage payment: £729 pcm. We purchased the property in April 2005 for £205k.

We are also looking to extend our 2 bed bungalow to a 4/5 bed family home by extending into the roof space. We have commissioned an architect last Tuesday and he should have drawrings ready for submission for planning application within 2 weeks. 75sq metres x £800 per sq meter = £60k approximate cost for extenstion. We are confident we can come in at £50k with our builder. We have about £6k in savings split between 2 ISAs.

Having spoken to Halifax last week they have advised me that:
- on 1 Feb our mortgage will revert to the 6.5% Standard Variable Rate
- the best 2 year fixed rate they offered us is 4.99% with £299 app fee
- the best open mortgage they could offer (allowing us to borrow more when planning is approved) is a tracker 1.3% above BOE base rate making 5.8% at current rate.

Having religiously followed Martin's 'Make Me Rich' programme, I understand we should be 'rate tarts' and get the best deal every 2 years.

Here's where we are stuck. Should we:
a) Remortgage for £45k more with another lender and put the £45k in a high rate savings until building can start. Best fixed appears to be with Leeds Building Society Direct 4.26% fixed for 3 years, no extended tie in.
b) Just move the curent £132k to the 5.8% tracker with Halifax meaning we can leave them at any time, there is no arrangement fee (monthly mort payment would jump up £120)
c) Try and find a more flexible mortgage with another lender that will allow us to move our current £132k and then borrow more when planning is approved?
d) Are there any special mortgages that we have not seen for such house extensions.

Any advice would be gratefully received! Mr & Mrs T

dwsjarcmcd

I may be tempted to look for an offset mortgage, typically a tracker because they tend not to have fees or redemption penalties. Borrow the whole amount and place the money you need for your conversion in the savings part and draw it down as you need it. That way you only pay interest as and when you borrow the money and you can remortgage away at the end of the renovation.
Typically you should get a tracker rate of 0.5 to 0.75% above BoE. Hope this helps

annie-c

Yours is quite a complicated situation - people on this site may be able to offer opinions, based on their own experience, but you could get free professional advice tailored to your situation by trying a commission-based mortgage broker. I've used London and Country and found them helpful. Martin lists a few others on the mortgage section of the site.

Good luck!

Remortgage06

Thanks for both the replies so far. Yes I plan to phone around tomorrow and speak to a few companies, just wanted to canvass some opinions on here first to ensure I had not missed a trick, just about to read up on offset., I have the printed copy of Martin's 'Guide to Remortagaging' and the sales pitch from L&C.

One part I was going to add:
I guess if we did remortgage for £45k extra (£177k total) on a fixed rate and did not get planning approval, most mortgages offer the ability to over pay up to 10% each year so could pay it back off the capital sum over 2 and a bit years..........

Also, value of house after work, probably £275k - £325k - can that affect any rate or mort decision. How or when does that valutaion get done when adding to a property?

herbiesjp

The valuation on a re-mortgage is done when the once application has been received and valuation fee paid - so in your situation well before any work/extension has been completed

Remortgage06

Just to update. Finally went via L&C to get a 2 year fixed at 4.49%. £595 application fee, overpayments allowed and interest calculated daily. Free legal and valuation. Applied today, awaiting decision.....

N.B Beware the Portman deal at 4.3% as interest calculated annualy so you would end up paying more than the C&G deal if you overpay £50 a month, apparently!