How do I get Home extension loan not on variable rate

nickya_2

We are just about to sign for purchase of new house with fixed rate mortgage of 4.99%. We will have to build and extension immediately so have tried to secure the further advance of funds upon completion at that same rate...to no avail! They will only give us a home extension loan on the variable rate...how can I get my hands on around £14-16,000 on a lower rate and avoid having the loan of 14-16 on the variable rate until the bulk of my fixed rate mortgage comes to an end in 2009

MarkyMarkD

My answer depends on the proportion you are borrowing of the house value in the first place.

If you are borrowing (say) 80% of the value, and the £16k takes the loan up to less than 90%, then I would say that you should just borrow the full amount up front. If the lender you are talking about won't do that, then choose a different lender.

If, though, you are borrowing such a high proportion of the value that the extension would take the loan above 90% of the original purchase price, things are more complicated. There are still lenders who would let you take the further advance on an incentivised rate, but it wouldn't necessarily prove good value to do so as it's only a relatively small amount. In some circumstances you would have to take the further advance at SVR, and then switch it onto an incentivised rate; the fees for the switch might outweigh the savings.

Given the rate you are talking about I wonder whether it's a special mortgage organised by the builder? If so, I can see why you don't want to lose it as it's a good rate.

All in all, I am not sure you should get over-excited about apparently paying over the odds on a small proportion of your mortgage.

After all, £100k @ 4.99% + £15k @ 7.25% (say) averages £115k @ 5.28% which is still a very good rate in comparison to other 2 year fixed rates in the market.