Split mortgage & remortgage

BillJG

Hi,

we currently have a mortgage with RBS, this however is split into two (large sum & small sum). These two mortgages are two different products with different rates, discount periods etc. My question is this, if we were to remortgage just the larger sum with another supplier would they take that as the whole mortgage enabling us to benefit from a better rate due to the higher LTV?

Thanks,
Bill

_Andy_

You won't be able to to that as then the second part would become a second charge loan which RBS either won't do, or will do but would significantly load the interest rate for.

BillJG

thanks, but if I did decide to do this would my new lender just take the larger part of my mortgage as my whole mortgage against the value of my property, e.g. value of property 100k, large part of mortgage 60k small part of mortgage 10k (to remain at RBS), new lender would give me an LTV of 40%?

_Andy_

Bill - you won't be able to do what you're proposing. If you want to remortgage you will need to switch the entire amount.

BillJG

why? Wouldn't the small amount just be considered as a secured loan as it was for extra borrowing? Can you not split your mortgage between providers?

_Andy_

The smaller amount was lent on the basis the lender / RBS has the first legal charge on your home.
Basically this means if you default on your payments and they need to re-possess, there are no other lenders involved in claiming from the proceeds of the sale. The interest rates are priced accordingly.

If another lender takes the 'main' bit of your mortgage, that new lender then has the first legal charge, and thus has first 'dibs' in the event of a sale.
Thus RBS would then have more risk.
You can give them a call as there's an outside possibility they would change it to second charge but even if they did the interest would be massively loaded meaning it probably isn't worth your while anyway.

lazysaver_2

Just to say that I am going through exactly the same thing transferring from Nationwide to Natwest - you have to take both parts of the mortgage. I have been told its illegal to have two mortgages on 1 property, but I am not sure that's strictly true.

The big part of my mortgage is coming to the end of the fixed deal at the end of July but the little bit is tied in til October.

However the ERC is so small that adding that to the £299 Natwest/RBS reservation fee is still half the price of the £995 Nationwide want for a pretty bad product!!