Releasing equity at existing interest rate

blued

I've just come to the end of my fixed period on my mortgage and as a result have dropped down to a low interest rate. We've been thinking about an extension so thought that now would be a good time to do it. However I called my lender (Direct Line) to check to see if there would be any problems borrowing and they said it would be fine and gave me these options -

2 yr fix 4.09% £299 fee
5 yr fix 5.29% £299 fee
2 yr fix 4.19% no fee
5 yr fix 5.39% no fee

After this period it goes to the standard variable rate of 4%. I (perhaps naively) assumed that I would be able to borrow at my new tracker rate at 1.5% above base rate. I didn't have time to ask about further deals or if that was possible.

Is this normal practise? Do other lenders allow you to release equity on your current rate?

StuC75

This is normal practise, only the original sum is on the original terms - amount \ rate \ term (mortgage funded by money markets).... Any additional advance is treated as a separate 'pot' / sub account which is at whatever rates available at that time. Check what your current valuation is to see what LTV ranges they have which you come within..

dimbo61

So you are saving money as you now pay a lower rate of interest.
Now if you have extra borrowing they will give you this money ( up to a limit Check LTV )but it will be at a higher rate.
You do not need to take it over the same length of term. If you can consider a shorter term OR overpay the more expensive part of the loan each month.

blued

I was afraid that would be the case, their current rates aren't particularly competitive and my tracker rate means I won't find a better deal moving the whole mortgage elsewhere. My worry is that if the base rate increases the SVR will go up with it. The base rate could go up 3.5% and my tracker would still be less than my fix but I don't want to be paying 7.5% on the SVR for example.

blued

dimbo61 wrote: »

So you are saving money as you now pay a lower rate of interest.
Now if you have extra borrowing they will give you this money ( up to a limit Check LTV )but it will be at a higher rate.
You do not need to take it over the same length of term. If you can consider a shorter term OR overpay the more expensive part of the loan each month.

Yeah I'll have to consider something like this, looks like I'm going to need to do some sums.

Do lenders ever offer any discounts on rates if you were to push for it? To encourage loyalty from existing customers?

bigadaj

blued wrote: »

Yeah I'll have to consider something like this, looks like I'm going to need to do some sums.

Do lenders ever offer any discounts on rates if you were to push for it? To encourage loyalty from existing customers?

Not likely, they are currently probably losing money on your 2% rate currently, so would be quite keen for you to move elsewhere.

dimbo61

We have no figures to work on !
LTV and outstanding mortgage plus how much you want to borrow.
Now there are a couple of lenders doing 5 year fixed rate deals at less than 3%.
We do not know your income or anything else ( Kids, wife, spending habits)
Ability to overpay, age, job, career, long term plans !!!
Use " whatsthecost" to work out some figures or post some on here.
IE house value £400K outstanding mortgage £200K want extra £50K to extend then stay with Direct line and overpay the expensive loan part.
If you owe £75K and want to borrow £50K then maybe worth moving lenders
Or speak to a " whole of market broker" after you have got your plans drawn up and planning permission sorted