What is this called?

AndyHi

Hi I have a mortgage that is split into two.

Let's say 60k at 3.99% and 60K at 2.5%.

I looked at the split of my monthly payment and found that they were fairly equal. I asked them to change this so I paid the more expensive debt first.

To do this they increased the term on the cheaper 2.5% which is now 37yrs and reduced the term on the 3.99% to 14yrs.

So now I pay a larger portion of my total monthly payment to the more expensive debt whilst still paying the same total that I did before.

Is there an idustry term for this?

Dave_the_Ginger_Cat

Not really - everyone calls it different things

I would describe it as having either two sub accounts or two different schemes. And looks a good solution to using your cash effectively. I trust you are happy with the 3.99 deal, and don't want to or can't change this part to something cheaper

AndyHi

I presumed I couldn't spread my mortgage over two lenders? I'm happy with the 2.5% SVR obviously.

kingstreet

I'd call it the;-

"lender inability to cope with borrower wanting to make tailored overpayments, so employs a "cackhanded" work-around plan."

On here recently, we've heard of at least one lender reducing the term for someone in these circumstances, then refusing to return it to its previous length when he decided it wasn't convenient to pay that higher monthly rate in the future.

AndyHi

I'm paying the same as I was before though?

kingstreet

You are trying to facilitate the quicker repayment of the higher-rated sub-account and slow the repayment on the lower-rated portion. It's similar to wanting to overpay.

It isn't quite the same, I agree, but it's the same reaction to an issue we've seen in other situations. As long as you can return to the previous term if you need to, there's no problem.

AndyHi

They're usually happy for me to play about with the terms. The 3.99 has just dropped after coming out of a 2yr fixed. 2011 I bought a new house and started the original 25yr term. Hopefully if I were to change both accounts to the same term it would now be less than 23yrs.

AndyHi

Also aren't overpayments limited? By changing the term I'm not fixed and can change as and when. Both are now variable.

kingstreet

Overpayments may be limited to avoid an early repayment penalty during a special rate period, but generally no they aren't. I'm talking specifically about lenders who can't give a borrower the ability to target overpayments at one particular part of their mortgage, who apply a "workaround" then quote FSA rules nonsense when that "workaround" puts them in a situation where the only way they will extend the term back to its original point is if the borrower can prove exceptional hardship.

As I said, as long as you can change back when you like, you should have no problem, but I don't want others reading this and thinking it's a great idea if they don't investigate the potential issues with their own lender.

jackieblack

kingstreet wrote: »

I'd call it the;-

"lender inability to cope with borrower wanting to make tailored overpayments, so employs a "cackhanded" work-around plan."

:rotfl:That sums it up nicely, I'd say

2kids1dog

why don't you add them together onto a low fixed rate ? as you are paying 2 rates against paying 1 rate on £120K? we are hoping to get £117k on 3years at 2.59?