Question about end of mortgage term

Sidhartha

Hi All,

I have an Alliance & Leicester mortgage (now with Santander obviously). I've had the mortgage about 14 years now. The mortgage is actually made up of two loans since I took some further borrowing back in 2005 - the further borrowing makes up 30% of the total mortgage.

For some reason (I obviously didn't even notice or consider this an issue back in 2005) the further borrowing I took only had a 10 year term on it, while the rest of my mortgage has a further 10 years remaining on the term (original term of this must have been 25 years).

So I have been surprised to find out recently that I have a lump of money to pay back this time next year to Santander.

Just to give all the details, my total mortgage borrowing is about 25% of the properties current value.

As I see it I have a few options come November 2015,

1. Pay back the further borrowing I took out in 2005 in full.
2. Take a completely new mortgage with another lender.
3. Try and extend the term of the further borrowing with Santander.
4. Do nothing - in these circumstances what would happen? A mortgage broker told me they would move me to the SVR on the further borrowing and probably charge me a monthly penalty fee (circa £100 per month) for keeping the loan past the term. Does that sound right? What are the implications?

The reason I am spelling these options out in detail are that options 2 ans 3 are complicated by the fact that my current salary is considerably less than 10 years ago and the multiple would not support those options I believe.

Thanks in advance for thoughts.

JimmyTheWig

How feasible is option 1?
That's what you've signed up to do, so if you are able to then that's got to be the most straight forward plan.

Presumably you contacted the bank 10 years ago directly for the additional borrowing and took the new loan on a non-advised basis?
Presumably your paperwork from the time shows it as being a 10 year loan?

Are both parts of the loan interest only?
Are you building up a pot to pay off the total in 15 years time?

Sidhartha

Thanks for the reply.

Yes I could pay it back with a bit of inconvenience - but frankly I'm loathed to if I can find an alternative. Especially with rates where they are - feels me to like I could find more interesting places to invest that money than paying off a cheap mortgage.

Both loans are interest only, yes.

Indeed I went straight to the bank for the further borrowing. I don't recall, but I was very busy at the time and think I probably just assumed it would be under the same terms as the original mortgage. The docs do indeed say November 2015.

In terms of paying off the other loan in the future, I own another property also + ISA fund which I am using as an investment to pay off the original loan.