Keeping the old mortgage and taking out a new one as well?

uropachild

We are moving house and the financial adviser mentioned the possibility of keeping our current mortgage (£65,000), which is on the SVR of 3.5% and just porting it to the new house. He said that we could then take out a "product" to cover the difference - around £50,000 - meaning that we only pay the SVR on most of the capital and fix the top up for probably 3 years at around 4.5%. Then when the interest rates go up we can do a product transfer, taking the first £65,000 in with the £50,000.

Does this mean we will have 2 mortgages? Will there be two payments goes out each month? If we do this are we limited to only taking out the "second" mortgage with our existing lenders or can we have the £65,000 with one and the £50,000 with another?

What do you think of this plan?

MarkyMarkD

In practice, both parts will have to be with the same lender.

The plan is fine in practice, but may not be the best overall deal. It depends what sort of "products" your current lender will give you on the top-up £50k - and whether they will lend you as much as you need.

E.g. based on the figures you are quoting, you'll be paying around 4% on average, if rates stay the same as they are now - which of course, they won't.

You could possibly get a deal elsewhere which isn't that much dearer, and which guarantees you the rate on the whole lot.

In summary, don't go for his deal just because it's cheapest right now - consider what might happen if rates rise.

You would only have one payment per month, both to the same lender.