Moving: porting mortgage but new borrowing at much higher rate

twisty

Hi can someone give me some advice please?

To cut a long story a bit shorter, my wife and I are looking to move in the next couple of months.

We currently own a one-bed flat which was valued at £135,000 - 140,000 by 3 estate agents last week. Our mortgage is slightly under £100,000 and is currently a lifetime tracker at 0.99% above the base rate.

The place we are looking to buy will be around £180,000. If we get 135,000 for our current property this means we will need a mortgage of £145,000.

We spoke to our lender last night about porting our mortgage and he said we could but the new borrowing (i.e. the £45,000 above what we already owe) would be at a different rate. The rates offered were a 2 year fix at 5.99% (£599 arrangement fee); a 5 year fix at 6.69% (£599 arrangement fee); or a tracker (sorry can't remember the tie-in) at 4.49% above base rate. Is this common?

I'm a little unsure what to do. My initial considered opinion is that this still equates to a better deal than I am likely to get by taking the whole amount from another lender. I'm aware that BOE rates are likely to go up at some point in next couple of years, so I was thinking take the 2 year fixed option now and then re-evaluate in 2 years time and maybe get a cheaper deal for the whole amount.

I'd be really grateful to hear any advice you have, and whether there's anything else I should be thinking about or asking.

Cheers!

getmore4less

Sounds about right on the rates.

The low cost tracker is going to be good for some time rates will have to go up a lot before that +0.99 deal can be beaten.

Ask if you can go to interest only on the low cost ported loan and overpay(shorter term if needed) the higher rate borrowing.

twisty

Thanks, good advice about asking to go interest only on the cheaper debt to focus payments on the more expensive debt. I think this particular lender may say no, but it is definitely worth a shot.

Btw, do you know what will happen when my 2 year fix ends - will I be able to remortgage just the money tied into this deal? Or will I have to do remortgage my debt as a whole?

dimbo61

You need to find out what the second part of the mortgage reverts to after the fixed period ends ( SVR ?) so ask the lender when you talk about going interest only on the 0.99+ part of your mortgage.
Its only 0.69% more expensive to take a five year fix !

dimbo61

Ask what overpayments are allowed on both parts of the mortgage

twisty

Thanks this is really helpful - I am waiting for the agreement in principle letter to arrive in the post and then I will read through thoroughly before phoning with all these questions.

My wife - who made the initial call - says that it reverts to the SVR when the deal is up.

Just indecisive now about whether to go for the 5 year or 2 year fix. I suppose it will depend on the answer to the overpayment question.

Thanks - lots of things I hadn't thought of