Loan from existing mortgage

Cupcakekisses

Hi,


I am looking for some advice on a loan which was attached to our mortgage on a previous property.


A bit of background…
We purchased a house in 2007 at a time when the banks were handing out plus mortgages, we got a 95% mortgage and a £20k loan for improvements.
Skip forward to 2011, we moved in to a new build property which required us to have a 20% deposit and as we part-exchanged value had to be 30% above existing property value, we were led to believe through a financial advisor that the secure loan would be repaid in the new mortgage (so we would just have a 'mortgage' with nothing attached). Long story short it didn’t happen like that and we ended up with a mortgage and two loans (the mind boggles!!!) and the interest rate on the old property loan increased from 2.49% to 7.49% with the mortgage and loan on our new property staying at 2.49% (I hope I haven't lost you yet). We were left with a very bizarrely set up mortgage which to this day we cannot fathom out (we know the overall amount borrowed is correct but its been split three ways very frustratingly).
Anyway, my question is do we have to keep the loan which is not attached to our current mortgage and at a higher rate with Santander (our mortgage provider) or do you think we can move our loan to another provider. We pay £132.22\month on the loan but it is over approx. 28 years as it was originally a 35 year term, we can afford to pay higher monthly payments but I’m not sure if what we are wanting to do can be done? Do we overpay to Santander or try to get a different loan?
Sorry if I’ve confused you, I’m confusing myself! I’m happy to provide more details if anyone can offer some advice, I’ve put this in the loan tab as I don’t think its specifically mortgage related.
Thanks all J

longtermplanner

You need to know what the terms are for early repayment of this loan. It is not common to be able to overpay an unsecured loan but in some cases it is possible. Ask Santander if it can be overpaid. Also ask for a figure to settle the loan now.

You can't 'move' a loan to another provider, you have to take out a loan with someone else and use it to repay the Santander loan - that's why you need to ask for the figure to settle the loan now. As it sounds as though this loan is for well over 20k, you are going to find it very difficult if not impossible to find another bank that will lend you that much unsecured.

If part of your mortgage is at 7.49% (sorry I am confused), then one option may be for you set about overpaying that part of the mortgage.

Thrugelmir

Ask Santander if you can overpay the unsecured loan. I suspect that they will be more happy for you to do so.

Longer tern when there's sufficient equity in the property. Then you should be able to refinance the unsecured loan by securing an additional mortgage (product).

Cupcakekisses

Thank you Thrugelmir, I think I'll give Santander a call in the morning. Our intention is to repay the higher interest loan as a priority (at least double our current monthly repayments), refinancing the unsecured loan into a mortgage product is food for thought which I'll also investigate alongside the higher payments.

Longtermplanner, I apologise my terminology isn't as clear as it should be, by 'move' I did mean apply to another provider, but I am not sure what you mean by "as it sounds as though this loan is for well over 20k"....I can assure you the statement currently sat on my knee has a balance of £18,709.90 with a remaining term of 28 years 9 months. With an interest rate of 7.49% and monthly payment of £132.22 I hope you can appreciate me calling out for advice on whether it would be viable for me to query overpaying/alternative provider.

Thrugelmir

If you can manage to scrape together a reasonable sum with which to overpay. You should be able to make inroads into the unsecured debt fairly quickly. Interest rates aren't going to remain low indefinately. Currently you are paying a low rate on the mortgage. So make hay while the sun is shining as the saying goes.

Cupcakekisses

To try and help with the confusion here is our 'mortgage' as a whole picture:

Mortgage £84,093.08 , 2.49% , £341.54/month (28yr 9months outstanding)

Loan £17,968.83 , 2.49% , £72.92/month (28yr 9months outstanding)
(The two above should have been combined)

Loan* £18,709.90 , 7.49% , £132.22/month (28yr 9months outstanding)

*ported from previous property which should have been combined with the 'new' mortgage but wasn't - both 'loan' statements received have the following wording on the back:

"You can settle this agreement at any time by giving us notice in writing and paying off the amount you owe. If you wish to settle early you should contact us for a final settlement figure."

Therefore I will check the terms of early repayment charges but (and I don't know) 'if' there aren't any charges on early repayment of the two loan aspects it would make more financial sense to pay them off as a priority and almost ignore the 'mortgage' aspect at the moment? (Tackling higher interest rate first?) Or is that a load of garbage? I feel the need to say all three aspects above are our 'mortgage' on our current property (ie they add up to the value of the mortgage we required for the property) it's just been set up very bizarrely - could work in our favour if we avoid any early or overpayment charges on the two loans.

(I'm trying to see a positive out of a very complicated situation).

longtermplanner

I did a quick bit of mental arithmetic which got to 23k, sorry I shouldn't have been sloppy but should have checked.

But my point stands. Who else is going to lend you over £18k unsecured?

Cupcakekisses

I see your point longtermplanner, I think overpayments to Santander may well be the way to go. That's a call for tomorrow.

Clive_Woody

Mortgage £84,093.08 , 2.49% , £341.54/month (28yr 9months outstanding)

345 x £341.54 = £117,831.30

Loan £17,968.83 , 2.49% , £72.92/month (28yr 9months outstanding)
(The two above should have been combined)

345 x £72.92 = £25,157.40

Loan* £18,709.90 , 7.49% , £132.22/month (28yr 9months outstanding)

345 x £132.22 = £45,615.90


Total = £188,604.6

Over payments are definitely the way forward if you can manage these as above are the calculations that show how much you will repay if you let this run the full 28yr 9months - assuming that interest rates do not go up from the current record lows....

Cupcakekisses

Clive_Woody wrote: »

Mortgage £84,093.08 , 2.49% , £341.54/month (28yr 9months outstanding)

345 x £341.54 = £117,831.30

Loan £17,968.83 , 2.49% , £72.92/month (28yr 9months outstanding)
(The two above should have been combined)

345 x £72.92 = £25,157.40

Loan* £18,709.90 , 7.49% , £132.22/month (28yr 9months outstanding)

345 x £132.22 = £45,615.90


Total = £188,604.6

Over payments are definitely the way forward if you can manage these as above are the calculations that show how much you will repay if you let this run the full 28yr 9months - assuming that interest rates do not go up from the current record lows....

Its a big eye opener when you look at it like that, I'm going to make the call now!

Cupcakekisses

The verdict is in, from speaking to customer services (who were really lovely) we can pay a minimum of £500 at a time off the outstanding balance without incurring any charges and we can also increase our monthly payments to a maximum of £499/month if we want to. I think at the moment overpayments are the way to go.