2 Decisions in principle?

mpgsheep

Hi, have applied for a decision in principle from Nationwide for a mortgage. We are having to go through the underwriter for approval as my wife is on maternity leave, and the application is more complex than normal. The mortgage we are applying for is the 4 year "flexclusive" at 4.29%. House purchase price is likely £290,000 and would be borrowing £246,500 (so 85% LTV), so a monthly payment of £1,218.41.

At the moment, we are currently on the Direct Line/RBS variable rate of 1.5% above base, with approx £147,000 outstanding. I had spoken to RBS previously to check if we could port this amount over, and then have additional borrowing at their new rates, ie something like this:
£147,000 @ 1.5% above base (2%)
£ 43,500 deposit
£ 99,500 borrowing @ either 6.19 (5 years) or 5.95 (2 years).

Logic being for this would be to keep our existing very cheap borrowing, and then have the expensive borrowing to target for any extra cash we have. Then the combined new payment would be either £1232 (5 years) or £1216 (2 years).

So as you can see, very similar monthly figures for either mortgage, but also 2 different strategies. We would be living quite close to max budget once moving, thus the 4 years fixed for the 4 years appeals, however keeping our currently cheap borrowing figure with the option to pay down the expensive portion with any extra we have (I usually receive a bonus in February so that could happen) also has its appeal.

So my question is 2 things:

1) Can I apply for a second decision in principle? (is it likely to hurt my credit score at all?)

2) What are peoples opinions on the two mortgage paths?

triffid123

From recent experience, AIPs seem to mostly be a soft search of the credit file, i have had 2 in the last 6 weeks from Halifax and Nationwide. These do not hurt your credit rating and do not show up to anyone other than yourself on your credit file.
Your best bet would be to ask before going through the credit application to see if the AIP from the banks you plan on going to use the soft search option.
Bear in mind if you go through the full application a hard search is then done.

holly_hobby

A DIP will leave a footprint with CRAs, as it is a full credit search - so the Nwide DIP will be recorded (although this is not necessarily a negative irrespective of anything else - its where there are several recent searches that lenders get a bit tetchy.

An AIP does not leave a footprint, as it is only public domain info (i.e CCJ, Bankruptcy, Voters roll), that they search (as to avoid leaving a marker on your credit record).

Porting your current mge product, as you are aware, is by the express permission of the lender, and subject to full underwriting. The ported deal is applied to the same amount of borrowing it related to at the time of redemption (not the original amount it was taken out under - which is obviously relevant if it relates to a C&I borrwoing), with any further borrowings placed on a product from their curent portfolio.

Hope this helps

Holly

Dave_Ham

As stated, will not hurt your credit file hugely.

My view would be that you have a decent understanding of the pro's and con's and are in the best position to judge the best option.

Shooting from this hip, I think keep the low rate and overpay on the expensive 2nd product every spare penny. So long as you get a couple of years as they are currently, you should notice the difference.

All the best

Wh05apk

Agree with Dave, keep the low rate, take the 2 year deal, then in 2 years it will drop to their SVR - currently 4%, with the original still at 2%.

mpgsheep

Appreciate all the feedback everyone.

Dave Ham + Wh05apk, is there not the risk that in 2 years that the base rate could go up? That is what I am concerned about, if it goes up by 2%, then am paying 4% + 6%, and then after 2 years still 4% + 6%. However it does feel like 2% above base on the bulk of my borrowing is going to be a good deal for quite a long time.

Dave_Ham

There is unfortunately always risk, but if and when the base rase increases it is unlikely to be in big chunks at a time.

Also, for every month goes by you are banking that saving.

mpgsheep

Well am not really banking the saving. I will be using it to pay the expensive borrowing. If I am able to pay off additional on the expensive borrowing then it works, and also it works if the interest rate is unchanged and then in 2 years I can move to the SVR.

Dave_Ham

Figuratively speaking, rather than literal.

Still, you have answered your own question so confident you know what you are going to do.

Good luck

mpgsheep

Thank you for your guidance. Although this sounded like the right option, it is nice to have it reconfirmed

mpgsheep

Spoken to RBS now. They advise we pass the affordability required for the additional borrowing. However they said that they do not give AIPs until we have had an offer accepted for the house we are purchasing. Bit irritating, because it means we can't use the tactic of telling our vendor that we have an AIP arranged already. Also means then we have to pay for valuation as part of the AIP process, and then be rejected.