Remortgaging, Is this possible

Ma77hew

I have an offset mortgage, at 3.79% its fixed until Dec 2018 and has a £7.5k redemption fee atm.

My house is worth c£400k mortgage is £146k so 36% LTV

Would it make sense to take out a new mortgage to get the LTV to 60% and offset the new mortgage against the old one?

I am with Chelsea, so figures I am working with are:
Increase mortgage by £94k

Take out fixed 3 year mortgage to April 2018 so 37 months
£94k at 3.79% for 37 months is £11k
£94k at 1.84% for 37 months is £5.3k

Gives a saving of £5.6k arrangement fee is £1.6k so total saving of £4k, well, wouldn't be an actual saving it would be instead of £4k payments on interest there would be £4k payments of capital instead.

Obviously with the ERC I would be worse off just switching to a new mortgage whilst closing down my existing one, so wondered if this would be a good alternative.

Are there any pitfalls of doing this, are Chelsea likely reject a remortgage?

Am I restricted to using Chelsea?

Combined income is about £90k so getting a mortgage of £240k I don't think would be an issue.

betmunch

I cant understand what you are trying to do.


What do you want the extra money for? just to put it in an offset and leave it? or do you have plan for it in the future.


Your calculations show that its not going to save you more than the ERC so why bother?

Ma77hew

betmunch wrote: »

I cant understand what you are trying to do.


What do you want the extra money for? just to put it in an offset and leave it? or do you have plan for it in the future.


Your calculations show that its not going to save you more than the ERC so why bother?

By putting it into the offset savings account I save £11k of interest at a cost of £5k of interest.

So in my head I am effectively remortgaging to a lower interest rate without taking the ERP hit.

betmunch

how are you not taking the hit?


If you pay back your existing mortgage while the ERC is payable they will charge you.

Ma77hew

By putting it into the offset savings account rather than repaying it as a capital repayment.

somethingcorporate

betmunch wrote: »

how are you not taking the hit?


If you pay back your existing mortgage while the ERC is payable they will charge you.

It's going into the offset so not being repaid and not triggering the ERC.

I think the logic works OP - have you talked to the mortgage co?

betmunch

by putting what in the offset account? The 94K?


How are you getting the £94k? By remortgaging to £240k


And that means you are incurring the ERC.

JimmyTheWig

OP, that's a great plan. Sort of crazy scheme I come up with. [If you're (un)lucky I might tell you the story of when I happily paid 4% ERCs 3 months after getting a mortgage.]

A few points...
1. It is not a remortgage. Remortgaging means redeeming your existing mortgage and going to another mortgage provider. What you are doing is requesting additional borrowing.

2. You cannot go elsewhere with this plan. Generally mortgage companies won't give you money on a property unless they are the only mortgage company.

3. If you have been looking at deals for new customers / remortgaging customers then you might need to rethink your figures. You need deals for customers increasing their borrowing. From my experience these are only revealed by phoning the mortgage company up.

4. You will end up with two loans on the one mortgage account. These loans can have different tie-in periods, which can leave you tied to a provider for many years. Though in your case it shouldn't be a problem as you can pay off the first part as soon as the tie-in deal finishes if you want to.

5. The mortgage company may ask why you are looking to borrow this additional money. They might not like your idea. Maybe think of some other ideas that you might be spending this money on.

6. Even if you tell them your plans and they agree them, they can't guarantee that you will be putting this money in your offset. In which case you will need to pass affordability criteria based on the full loan. Though with the salary you quote that shouldn't be a problem.


Let us know how you get on.

JimmyTheWig

betmunch wrote: »

by putting what in the offset account? The 94K?


How are you getting the £94k? By remortgaging to £240k


And that means you are incurring the ERC.

Not remortgaging, taking an additional loan.

betmunch

JimmyTheWig wrote: »

Not remortgaging, taking an additional loan.

Its a further advance? That's what I was missing.


The OP says taking a new mortgage so I thought hes taking a new mortgage. Silly of me.


A further advance could work subject to the points you made above

somethingcorporate

Why only £94k OP, makes sense to offset as much as you can afford.