Is it possible to have a 2nd mortgage on the same property?

NorthernMonkey1967

:money: I have a great interest rate on my current mortgage of £100K which I don't want to loose, however I need to borrow c.£25K for home improvements. If I add this to my existing mortgage I will not get an attractive rate on the additional borrowing from my existing lender.
I have more than enough equity in the property to support both my existing mortgage and an additional loan but is it actually possible to take out another mortgage on the same property with another lender to take advantage of a better rate?

ACG

You can speak to your existing lender, they can do what is called a further advance.
You can also get a second charge/secured loan but the interest rates on these are pretty steep.
Another alternative is the likes of sainsburys and tesco's have pretty good rates on loans which are not secured.

kingstreet

If you are talking about competitive advertised mortgage rates, the answer is no, you can't.

A residential mortgage requires a first charge over the property and you can have only one of those; your current lender has it. A new lender would have to accept a second charge, worse security, as it only gets what's left over after the first charge holder in the event of repossession.

That's why the rates for second charge business are always higher, to reflect the lender's greater risk of not being paid-back.

NorthernMonkey1967

NorthernMonkey1967 wrote: »

:money: I have a great interest rate on my current mortgage of £100K which I don't want to loose, however I need to borrow c.£25K for home improvements. If I add this to my existing mortgage I will not get an attractive rate on the additional borrowing from my existing lender.
I have more than enough equity in the property to support both my existing mortgage and an additional loan but is it actually possible to take out another mortgage on the same property with another lender to take advantage of a better rate?

Thanks for your advice. I have asked my existing lender for a further advance, and they are happy to oblige at an extortionate rate! My property is worth 3 x my existing £100K loan at the moment and planned improvements would probably add at least another £50k to property value so I don't think I have a problem with equity.....?

kingstreet

Extortionate?

In my experience, additional borrowing is normally no worse than the lender's standard variable rate.

What have you been offered? Which lender is it?

NorthernMonkey1967

"Extortionate" by comparison to my existing rate which is a Repayment Tracker 0.74% above "base rate" for life of mortgage (now 19 years).
The same Lender has offered an additional advance of £25K to £40k at 3.29% above "base rate" for two years only. I probably only need to borrow c.£25K as I intend to also use my £20K savings for the work.....

kingstreet

I understand.

Unfortunately, you aren't going to get another "pre-crash" rate, like the one you currently have.

Compare the two strands of borrowing and see if they are still more cost-effective than remortgaging to one product with a new lender.

I expect they will be...

Thrugelmir

NorthernMonkey1967 wrote: »

"Extortionate" by comparison to my existing rate which is a Repayment Tracker 0.74% above "base rate" for life of mortgage (now 19 years).

With base rate at 0.5% lenders simply cannot afford to match rates at this level. For the simple reason it would lose them money.

If you consider it expensive. Continue to save. Then pay for the work when you have the cash.

ACG

Its not extortionate, your just benefiting from the recession on your mortgage. They never seen this coming in a million years so never expected anyone to be on 0.74%.

Extortion is when someone is forcing you into something. Your free to go elsewhere - i cant imagine you will beat your current rate anywhere else (even averaging out your existing rate with the top up rate).