Mortgage for less than £30,000?

Doozergirl

My aunt is coming to the end of her fixed term and her interest rate goes up to 6.5% or thereabouts, in May. Admittedly, her payments will only increase by £38 per month, but I put her on to my mortgage broker anyway.

He says that because her mortgage is so small it wouldn't be worth his or her while to remortgage and she would have trouble finding a company to lend her so little anyway. She should try to renegotiate with her existing lender.

Is he right? And if she does try to renegotiate, what bargaining tool does she really have with them?

pandas66

I had huge trouble getting a mortgage 2 years ago for £26,000, apartly its a personal loan under £30k now!.
I did get 1 with Yorkshire Bank and by paying weekly the interest is calculated better.

Raggie

people of more knowlege may be able to help here.. but..

if there is value in the house.. and she has the income multiple to do it..

why not get a bigger loan than she needs.. say £60K.. in a offset Mortgage... and keep the £30K she does not need in a "linked" savings account.

She would only be paying interest on the outstanding £30K.. and with it being a larger loan would get a better rate of interest..

HelpWhereIcan

Raggie wrote:

people of more knowlege may be able to help here.. but..

if there is value in the house.. and she has the income multiple to do it..

why not get a bigger loan than she needs.. say £60K.. in a offset Mortgage... and keep the £30K she does not need in a "linked" savings account.

She would only be paying interest on the outstanding £30K.. and with it being a larger loan would get a better rate of interest..

One possible way to do it. Problem is that with many lenders, the contractual minimum monthly repayment will stay at that for a £60k mortgage. If she can afford that payment, it will knock a lot off her term and interest but she will need to be sure it is affordable.

TBH, there will be many advisers who do not see a mortgage of less than a certain amount as being worth doing (certainly without charging a fee).

The majority of lenders will do a mortgage for more than £25,001, but only a few will do less than £25,000 - Nationwide, Halifax, Yorkshire Bank, Abbey, Bank of Scotland, N&P, first Active, Woolwich (I think), Leeds B Soc and Skipton B Soc amongst others.

The other thing she will need to be aware of is that as her balance reduces, her options for remortgage become limited so she may want to look at a long term deal such as a long fix or tracker for life to make sure that she does not come up against this scenario again.

Hope this helps

regularsaver1

there may be more fees than what she is looking to save by actually moving away

she should see what her existing lender should offer in order to make comparisons

cheghead

My fixed rate with A&L finished I went on their (currently 5.25%) flexible mortgage. There is not a minimum limit as far as I can remeber and you can overpay as much as you like. Depending on the cost of her exit fees it may be worth looking at?

roswell

Helpwhereican,

Just a question but if she had a offset of 60 000k and 30 k in the bank that would mean she has 30 k at 0%, so her monthly payment could be set to reduced payment instead of reduced term thus giving her a repayment figure the same as a 30 K morgage or have i got that wrong ?

HelpWhereIcan

roswell wrote:

Helpwhereican,

Just a question but if she had a offset of 60 000k and 30 k in the bank that would mean she has 30 k at 0%, so her monthly payment could be set to reduced payment instead of reduced term thus giving her a repayment figure the same as a 30 K morgage or have i got that wrong ?

Theorretically, you are right, but not every lender will allow the amount offset to reduce the payment rather than the term. It can be a dangerous assumption to make that every lender offering an offset will allow this option.

In most cases, the deals on offer with the lenders that will allow a remortgage of less than £30k will be competitive enough to mean that there is little to be gained by complicating matters by borrowing extra to offset against a mortgage account that may not offer as competitive deal in the first place.

I could not see the ombudsman refusing to uphold a complaint against me if I arranged this for a customer when more 'straight forward' and possibly cheaper options were available - after all, I could have just been encouraging her to borrow extra to get more commission!!! :rolleyes: and I am sure there are many out there who would interpret my having done it the same way.

But yes, could be done in some cases, so perhaps I should have said "could stay at the repaymet for a 60k mortgage."

herbiesjp

You don't have to look at offset though - borrow higher if need be on a flexible or standard/no early repayment charged mortgage, and then make a capital overpayment of the excees amount of the mortgage