Borrowing for home improvement - wil I lose current mortgage rate?

stevelondon88

Hi, new user here.

I am considering extra borrowing to do a house extension and was thinking of just adding it to my existing mortgage. Currently we have a very good rate of 2.5% variable (It will always be 2% above base rate maximum). If I ask for extra borrowing, will the entire mortgage be renegotiated? Is it better for me to take out an entirely separate loan for the improvement and keep the existing mortgage on this competitive rate? What would you advise in this situation?

CLAPTON

Depends upon your mortgage deal so
ask the mortgage company

maninthestreet

How much equity do you have in the property, and how much do you need to borrow?

kingstreet

This would normally be dealt with by additional borrowing at a different rate and your current arrangements left as they are.

If you come under pressure to change, or are offered "a good rate for all your borrowing" come back and post on here.

stevelondon88

maninthestreet wrote: »

How much equity do you have in the property, and how much do you need to borrow?

I'd prefer not go into details - would this have an effect on what my best option would be?

stevelondon88

kingstreet wrote: »

This would normally be dealt with by additional borrowing at a different rate and your current arrangements left as they are.

If you come under pressure to change, or are offered "a good rate for all your borrowing" come back and post on here.

Good to know. Thanks.

kingstreet

Lenders won't work to the "later improved value" before the work is done, so you need to have plenty of equity in the property now, to be able to raise extra borrowing to carry out your improvements.

ylesia

I have recently looked into this with Nationwide, I am on their 2.5% BMR. the reply I got was that if I was only borrowing back what I had overpaid previously then all borrowing would remain on the BMR but if it was additional borrowing then the whole mortgage would have to be on a new deal and I would lose the BMR.

Thrugelmir

ylesia wrote: »

I have recently looked into this with Nationwide, I am on their 2.5% BMR. the reply I got was that if I was only borrowing back what I had overpaid previously then all borrowing would remain on the BMR but if it was additional borrowing then the whole mortgage would have to be on a new deal and I would lose the BMR.

Interesting information.

kingstreet

ylesia wrote: »

I have recently looked into this with Nationwide, I am on their 2.5% BMR. the reply I got was that if I was only borrowing back what I had overpaid previously then all borrowing would remain on the BMR but if it was additional borrowing then the whole mortgage would have to be on a new deal and I would lose the BMR.

I'd like someone to take this on with a formal complaint. I'd heard of lenders using such arguments to take people away from rates they don't want to lose.

It's my understanding if you approach Nationwide for additional borrowing when you're on a fix, for example, it's policy to leave the fix alone and to provide additional borrowing on a different product, using a separate sub-account.

The additional borrowing application form asks for the new product you've chosen, the amount, the term, the repayment method. Nowhere does it mention you're making any changes to the existing mortgage.

http://www.nationwide-intermediary.co.uk/includes/pdf/M96i-1012.pdf

See page 6.

So, why is it the only time the existing mortgage is affected is if you're on BMR?

I'm going to ask our Nationwide BDM about this, next time I speak to him.

kingstreet

I have a new BDM and I've emailed her instead.