Remortgage or borrow on existing deal

sndb

Currently I have a 90000 repayment mortgage at 5.59% fixed until 31st March 2011. Monthly repayments are £624

I am looking to borrow an addition £40000 and have 2 options

1. With existing provider get additional product £40000 at 5.5% fixed for 2 years works out at £285 a month

This would mean i would be paying
90000 at 5.59% for 9 months, then SVR 2.5% until I remortgage
40000 at 5.5% for 26 months

I say 26 months cos there would be an early redemption on second new loan if paid before then.

Then after 2 years I would remortgage the total balance out

Doing this would have an 195 arrangement fee

2. Remortgage total 130000 now at 2.99% fixed for 26 months at 699.3

With this option I would have to pay a 2% ERC on 90000 = 1800
+ arrangement fee of 945
total cost 2745

So what I have worked out is that over 2 years or 26 months

1. mortgage at 5.59 for 9 months + next 17 months at SVR I have used 3% but is actually lower + new borrowing at fixed 5.5%)= 21766

2. 699 new *26 = 18181.8

Difference 3585
minus fees 2745
total 840

So by remortgaging at option 2 it would save me 840 over 2 years


does this look right? :eek:

getmore4less

the actual calculations need to be done like for like.

option 1.
£90k 5.59% for 9 months then 2.5% 17months 20y term is £624pm

£40k @ 5.5% 26months 20y term is £275pm

£199 fee

Total payment is say £900

option 2

£130k @ 2.99 26months £721 but to do like for like you need to pay the same as option 1.

£2745 fee

So like for like is same starting point and same payments.

OPtion2
£132745 @ 2.99% £900pm after 26 months £117,474.37

option1
£40199 @ 5.5% £275pm after 26months £37,699.10

£90k @ 5.59 £625pm after 9months £88,113.37
£88,113.37 @ 2.5% £625pm after 17 months £80,482.67

Total £118181.77

option 2 is cheaper.

what is the follow on rate on option 2,
2.5% SVR is good so might be worth hanging onto it.

sndb

thanks for the reply

The follow on rate on option 2 would be 3.5%

with option 1 the 2.5% SVR is there currently as it guarentees not to be more that 2% above Bank of England base rate (however obv this could change)

getmore4less

With the 1% higher follow on rate that current 2% over base might look good in two years time.

No other options for the extra borrowing from your current lender?

sndb

the other option they have given is variable rate 4.19% above base rate for 2 years so at current 4.69%
followed by 4.24% above base rate for rest of term

although again if I stay with my exisiting lender i would probably remortgage after the 2 years was up anyway