Upsizing - Current fixed rate

thorn_m

Hi all, looking for some advice and maybe draw on some of your experiences..

I currently have a fixed rate mortage with Natwest until 30/10/13 of around £70k and am looking to borrow an additional £100k to upsize. (around £75k equity)

1. Natwest have told me they will lend me the additional money but it I would need to take out a new mortgage (e.g. new 2 year fixed) on the new amount or pay the redemption fee to combine the existing £70k and the new £100k.

If i take the staggered approach it seems I will never be able to leave natwest without paying a redemptions fee.

Ideally id like to add the new amount to my current fixed rate (even if at a higher interest rate) so that I could get a better 2 or 5 year fixed at the end of October.

Has anyone experienced similar and found a way round it or do you have any other suggestions?

Cheers

G_M

Well to start with, have you found a new property yet? It's April. It'll take 2 months to find? (June). Then 2 months to Complete. (Aug). And your fix ends in.... September!

Or you could take out the additional amount on a variable rate mortgage. No fix. Then you can redeem it any time you want (ie to coincide with redeeming your current fix).

thorn_m

Well to be honest we have a shortlist of 3 properties all of which we would happily live in. (no second viewings yet as we are now waiting for a proceedable offer on our property - been in the market 1 week and have 6 viewings booked for this week).

I didnt consider the idea of taking the additional borrowing out on the standard variable rate to bes honest so will take a look at that now.. Like you said it would more than likely be a few months which is why it would hurt so much to pay the redemption fee..

WATTY1978

hi yes were in exactly the same position but a bit further down the line. we ended up staying with our current provider and will be paying the early redemption fee. it just worked out better overall with the new 5 year rate we secured. didnt want to pay but didnt have much choice. they should be able to help you figure out the best option but as the other post says by the time you buy you probably wont have much left to pay.
good luck x

kingstreet

Many lenders won't let you take part of a new mortgage on SVR. As there are no ERPs, they don't want business where you could leave them free of charge six months down the road. NatWest has no ERP-free products in its current range from what I can see.

You have two choices.

Go the NatWest route. Apply for the new mortgage with them and port the current rate to the first bit and take a new product on the increased borrowing. You'll have to accept you may not be able to sync the two parts together.

Apply for a new mortgage with NatWest, or a new lender on a new product. If it completes before the ERP expires on the old one, you'll have to pay the penalty to NatWest. You might get a better deal making the penalty worthwhile.

You''ll have to compare the deals carefully to ensure you are getting value for money.

As has been pointed out, you only have until the end of October as as we're in April now and you have not yet got a sale on yours, that may not be a problem.

thorn_m

Thanks for your thoughts... I would have thought a mortgage provider would allow you to remortgage if borrowing a greater sum as I am rather than accept a 3% redemption fee and lose a customer who would be signing up to a 5 year fixed.

We've had 11 viewings so far in 2 weeks, no offers but 3 considering options and one who would offer if proceedable. A 2nd viewing tomorrow plus 3 more booked in, so fingers crossed we will recieve a suitable offer soon.

Who said moving was stressfull :eek:

kingstreet

You need to understand the thinking behind early redemption penalties. They are not levied out of malice because you want to leave. To offer a fixed rate, the lender's treasury team has to arrange a rate swap in the money markets. The "other side" is a market counterparty which provides the guarantee for a fixed amount for the fixed period. The ERP compensates them for loss of interest if the contract is broken early.

Your lender will not benefit sufficiently from your new mortgage to make it worthwhile to allow you to leave your fix and pay the penalty for it for you. Lenders make very little profit in the early years. Often, two year fixed rates are loss-leaders with profit coming from arrangement fees and insurance sales. Only the intertia of those not moving on and rolling onto standard variable rate makes the mortgage profitable and only in the longer term.