Two mortgages, one house, what to do?

rosscouk

Hi there,

We moved last year into our second house. We took our old mortgage with us, worth about 130k, this is a mortgage on base rate + 2%, so we pay 2.5% a month, worth around £600. We then have a second mortgage on a 2 year fixed at 4.4%, this is worth about £310 per month. So we pay £910 per month with totaled.

The fix comes to an end in January 2014. Both products are with Nationwide. The property is worth around 250K and we owe about £190k with 23 years left to pay it.

So, I am not sure what to do next really. I suppose I should retain the 130k mortgage as the interest rate is so low and just look to change the second smaller mortgage. However if interest rates were to rise, I think we would have a problem paying the first mortgage. So I would also consider lumping both together to make 1 mortgage and then fixing for a decent amount of time 5y+.

Does anyone have any thoughts or advice?
Thanks alot.

kingstreet

Just by way of explanation, you have only one mortgage.

When you moved, your old mortgage ended and a new one started. The new one is made up of two sub-accounts, one for the amount/rate of your previous mortgage and another for the increased borrowing/rate you needed for the new purchase.

You have the option of keeping sub-account 1 on BMR for ever. You can then opt for a new product for sub-account 2 when the current product expires.

Alternatively, you can opt for a new product for the whole mortgage and give up BMR. However, if you do that, your follow-on rate will then be SVR, 3.99% and you will lose BMR for ever.

You should think very carefully if this is the right thing to do.

Having a base-rate tracker and a fix making up the overall mortgage strategy isn't a bad idea.