Mortgage amount too small - get around it?

si_clarke

Hi,

House bought for extensive renovation just before house prices went bezerk in 2000 and thus I now have a very small mortgage of £22,000. Being a full time university layabout (erm...student:rotfl: )at the time I took a fixed rate mortgage. It's now expired and I need something new.

For me the variable-rate seems best...even a full point interest rise would hardly touch my salary on this mortgage repayment amount.

Problem is thus: The woolwich seemed to have a great deal with a 5.6% tracker for those needing <80% LTV, but minimum loan is 50k.

Now I could do with an extra £3k on top of my mortgage for landscaping, new garden wall etc etc, but even with this added to the mortgage the products on offer are few and far between, even if LTV is as low as 12%

Questions
1) Can I apply for £50k (which is approx £300pcm@25yrs), which is easily within monthly budgets and then pay back a lump some of say £30k the month after the mortgage is approved, thus giving me effectively that which I desired in the first place?

2) C&G (current provider) offered to renew my mortgage on tracker fees-free, but to increase by £3k (for the landscaping etc) would cost me £299. Is it standard practice to charge a separate set-up fee for those folk requiring 'home improvement cash', or by going with, for example the woolwich deal as above, which is listed as fees-free, I could get the whole package actually fees-free?

Understandably I will research this and seek advice as necessary when I am ready for action, but any input from you guys out there would be really appreciated in advance

Thanks all.

Si:beer:

MarkyMarkD

(1) Yes you can do this, if the product doesn't have penalties for overpayments and you earn enough to get the £50k loan.

(2) C&G are not offering to "renew" your mortgage. They are offering you a product switch. All lenders, as far as I know, charge a fee for further advances and this would be on top of any product switch fee. (I note that you say C&G aren't asking for a product switch fee in any case). Whilst you could switch to Woolwich "fees free" from Woolwich's point of view, you'd still have to pay C&G's MEAF (exit fee) to redeem your current mortgage so the entire switch is not really fee of all fees.

By the way, I believe that quite a few lenders will do you a deal at £25k rather than £50k, so that might be an alternative worth looking into further IF you decide it's really worth paying C&G's exit fee when your mortgage is quite small and they are already offering you a fee-free product switch.

si_clarke

Thank you for that advice, and so promptly.

Although the product switch fee is free (with C&G), it would be £299 if I wish to take an advancement of cash. The MEAF is around £60 if i recall from original paperwork. From quick maths that would effectively put me out of pocket to the tune on £239 if i remained with them.

Obviously if the Woolwich charged a product fee for the extra cash over and above my outstanding mortgage amount, and such a fee is greater than the £239, then I'd gain nothing (ignoring interest rates for the min) for switching.

You say it is standard practice for lenders to charge if you request funds for Home improvements etc at the same time as taking out the mortgage with them? Are there any that don't? Why is this so? If for instance I took a 3k advancement, then two years down the line changed providers, would I not then have one product from the new provider, which paid off both the products from the old one?

All the best deals I have looked at to date put emphasis on higher loan amounts. I think a mortgage broker will be in order:T

:beer:

MarkyMarkD

Nooooo - you misunderstood.

Most or all lenders charge for a further advance WHEN YOU ALREADY HAVE A MORTGAGE.

Nobody charges you extra, on top of the standard product fees, just for borrowing more WHEN YOU REMORTGAGE.

So, as you say, if the Woolwich and C&G products had identical interest rates, you would be £239 worse off by staying with C&G.

Whilst there's no bad thing in asking a broker, the fact that broker commissions are a percentage of the mortgage amount may make some of them less interested in a potential £50k borrower than one borrowing £250k. I hope that you don't find that to be the case.