Extension/Mortgage query

Aberdeen_Taff

Okay, I've round in circles a bit over the last few months looking at different deals etc. but the long and short is I have a house valued at #350k and an outstanding mortgage of #125k which is currently with First Active on 1.1% above base rate so paying 1.6% or #579 per month.

I'm looking to take out #55k for an extension and am looking for advice again as the building warrant will be granted in the next week or two.

First Active are offering to mortgage the extra #55k at either 2 year fix of 4.99% no fee (#348) or 5 year fix of 5.79% with #299 fee (#374) so about #930 per month. All figures are over 21 years and 5 months.

Can add extra deatils but both employed earning #38 and 21k respectively, in Scotland and two children aged 5 and 3.
Their other alternative was to roll it all inot one fixed rate that panned out at about the same price.

I'm open to advice from anyone about what would be best and willing to take on variable rate rather than fixed too as there doesn't seem to be any huge likely in interest rates any time soon?

asc99c

Personally I'd be looking at waiting for a bit given those options. You've got to move a big pile of money off a stupendously good mortgage deal to get the extra cash. Ignoring the extra money for the extension, you're looking at an extra 3.4% on 125k - over £4000 year extra interest on your mortgage on the cheaper 2 year fix. Assuming the really low rate can't last for ever, at some point you'll have to get a more expensive mortgage anyway, at which point remortgaging for the extra money might not be as bad.

The other option, although I've never investigated if it can be done, is it possible to get a mortgage loan secured only on the extension, and leave your original mortgage where it is? If you can't get a proper mortgage, what are the other loan options? Even if they're more expensive than a mortgage, the fact you're saving the £4000 interest from your old mortgage may make up for it.

Aberdeen_Taff

I'm a little bit rock and a hard place with this one I think as we really need the extra room and have decided to stay put rather then move to do it and this would negate the need to ever move again. As an ex Forces man with 9 marital homes I can't tell you how good that feels!!!

The extension will have to go up but not sure if there is a better (cheaper) way than what I have found. Will investigate the additional loan alternatives but have only ever really done fixed terms as I ike to know where I stand.

dimbo61

So are First Active offering to allow you to take the Extra £55K over 2/5 years on a fixed rate deal while allowing you to stay on the 1.6% rate for the £125K you currently have ?
I would be tempted by the 5 year fix and check carefully if you can overpay this part and by how much (10%?).
Rates are going up sooner or later ( june 2011 is my guess) but by how much and when is the $64,000 question.
Have you considered remortgaging the whole lot and taking a 5 year fixed offset deal so you have security while the kids are young and build up savings in the offset. YBS have some good deals.

Thrugelmir

Aberdeen Taff, is your current tracker mortgage for a fixed term or lifetime?

I certainly wouldn't move from a 1.1% rate above base.

Aberdeen_Taff

Hi guys,

Trying to mull it all over and do the right thing but I gues none of us know what's around the corner.

First Active are offering a 5 year fixed at 5.79% for the additional 55k at #374 making about #930 all in or the whole 180 odd at 3.79% on a 2 year fix or 4.89% ona 5 year fix which is also about #930 per month.

I don't know masses about offset or interest only mortgages but would certainly be wiling to consider. I work in the public sector and (before tesea May wields the big stick/axe) could actualy retire in 13 years at 51 with about #130k commutation and approx #20k per year pension. that said i would be much more ikely to work for another 4 or 5 until kids were thru Uni (assuming they go down that route) meaning I would have between 3-8 year worth of mortgage to pay off which would easily be covered by commutation etc.

Plenty of variables I know but wondering what the thoughts are? Our mortgage was #830 per month until April when the tie in finished and the extra has covered architects fees etc so I am comfortable going up to 900 or so iwithout having to stress and, again, know that when my youngest goes to school in es than 2 years I will be another #2-300 better off per month.

Any thoughts gladly accepted.

Cheers for the advice so far. :T

Thrugelmir

Aberdeen_Taff wrote: »

so I am comfortable going up to 900 or so iwithout having to stress and, again, know that when my youngest goes to school in es than 2 years I will be another #2-300 better off per month.

And when interest rates rise? Will you feel comfortable then. There is a danger that people will assume these rates to be the norm. At some point in time they will rise. Quite possibly sharply.

Aberdeen_Taff

Thrugelmir wrote: »

And when interest rates rise? Will you feel comfortable then. There is a danger that people will assume these rates to be the norm. At some point in time they will rise. Quite possibly sharply.

Hi Thrugelmir,

I'm pretty comortable even with a sharp rise I was more pondering whether going tracker rather than fixed makes sense in the short to medium term or not. all my quotes so far are for fixed as that's what I've always had but maybe going tracker would be more benficial to my current circ's?

Aberdeen_Taff

dimbo61 wrote: »

So are First Active offering to allow you to take the Extra £55K over 2/5 years on a fixed rate deal while allowing you to stay on the 1.6% rate for the £125K you currently have ?
I would be tempted by the 5 year fix and check carefully if you can overpay this part and by how much (10%?).
Rates are going up sooner or later ( june 2011 is my guess) but by how much and when is the $64,000 question.
Have you considered remortgaging the whole lot and taking a 5 year fixed offset deal so you have security while the kids are young and build up savings in the offset. YBS have some good deals.

Hi there,

Thanks for the comments. First Active are offering to keep the #125k on the 1.6 with higher fixed rates on the other #55k. How does the fixed offset work? I've only ever had fixed deals in the past but am willing to consider other options.

Cheers

Aberdeen_Taff

Thrugelmir wrote: »

Aberdeen Taff, is your current tracker mortgage for a fixed term or lifetime?

I certainly wouldn't move from a 1.1% rate above base.

It is for life. I'm trying to work out the best way to finance the extra #55k and keep it but maybe I'm just lookign for the best of both worlds?

dimbo61

Your last post tells me that the current deal is for LIFE ! of the mortgage and any new deal you take for the whole mortgage amount wont be offering you that rate at the end of the fix! more like SVR of 4.99% or whatever the First Active SVR is at the moment ( please check what your deal would revert to if you took a fixed deal with them)
Now you need to read the offer paperwork carefully what does the extra £55K revert to after the five year fix ends? Use whats the cost to see how much you would still owe after fix period ends and can you overpay the fixed/tracker parts of your mortgage.
You have the best to both worlds and like THRUGELMIR has said dont give up that base rate tracker plus you have part of your mortgage debt fixed