2 mortgages on same house ?

carryoncamping

I currently have an interest only mortgage for £39,000 and I'm planning to have an extension built summer of next year which will cost approx £40,000 which will need a mortgage to pay for it.

I'm currently paying 6.5% interest (£211 per month) which is high by current rates. If I remortgaged now I could save about £50 per month (quite a substantial saving). But would I be able to get a second mortgage next year on top of the current one to pay for the extension?

Bearing in mind all the fees Building Societies, Brokers, etc charge might it just be worth waiting to do it all in one go next year?

(House currently worth 135,000)

Thanks

HelpWhereIcan

Hi

carryoncamping wrote:

I'm currently paying 6.5% interest (£211 per month) which is high by current rates. If I remortgaged now I could save about £50 per month (quite a substantial saving). But would I be able to get a second mortgage next year on top of the current one to pay for the extension?

The quick answer is yes. The lender you remortgage to may agree a further advance for the amount you need (although it will almost certainly be at a higher rate than the rest of your mortgage) or you may be able to get a secured loan (again probably at a higher rate, although it may be over a shorter term).

carryoncamping wrote:

Bearing in mind all the fees Building Societies, Brokers, etc charge might it just be worth waiting to do it all in one go next year?

Probably not. You may also have the following options:

1. Remortgage now to a fee free remortgage deal with no tie ins (for example The One Account Flexible Mortgage Option). This will allow you to switch lenders again when you need the extra money. Although you will have remortgaged twice you will have only paid one set of fees and will have paid a lower rate than your current 6.5%.

2. There are deals around that will allow you to arrange a pre-agreed credit facility for the 40k that you will need. You do not pay interest until you draw the money down and will have the money available with just a phonecall without having the hassle/cost of remortgaging.

3. You could use an offset mortgage to borrow the full amount now, putting the 40k in the offset account until you need it.

It is unlikely that the best option for you will be to stay as you are paying 6.5% interest (ouch), however, the fact that you have such a relatively small mortgage means that the savings to be made are not so massive that it is a foregone conclusion.

Because of the myriad of potential solutions, I would say to get advice and to choose a whole of market adviser preferably through reccomendations from family and friends. Failing that, speak with a couple of firms, making sure to ask the questions that Martins suggests in

http://www.moneysavingexpert.com/cg...101649966,86816,

Hope this helps