Re-mortgage question to clear debt

ideal_knowledge001

Hi Guys,

Just need a bit of advice around my situation.

I currently have a loan of £20k which I am hoping to remortgage and clear off in a month's time.

My current rate is 2.4% but if I do remortgage the rate goes above 4% with the same lender (I am currently in a fixed term contract). After remortgaging my total mortgage amount would be £175k, property value is £320k. My equity will be more than 40% so I thought the rate would be even better or the same as what I have now.

My question is can this rate of 4%+ be lower? As in a friend of mine can lend me some money to clear off the loan, provided I can remortgage and pay her back by early next year. Will lenders give a lower rate if I remortgage for 25k without having any debt, since the loan would have been paid off beforehand?

I spoke to the bank and they say they can't advise on this.
Any help be much appreciated.

Thanks

betmunch

Your problem is being caused by speaking to the bank.

Speak to a broker that knows about debt consolidation mortgages and I would expect them to find you a more suitable bank with a fair rate.

HappyMJ

ideal_knowledge001 wrote: »

Hi Guys,

Just need a bit of advice around my situation.

I currently have a loan of £20k which I am hoping to remortgage and clear off in a month's time.

My current rate is 2.4% but if I do remortgage the rate goes above 4% with the same lender (I am currently in a fixed term contract). After remortgaging my total mortgage amount would be £175k, property value is £320k. My equity will be more than 40% so I thought the rate would be even better or the same as what I have now.

My question is can this rate of 4%+ be lower? As in a friend of mine can lend me some money to clear off the loan, provided I can remortgage and pay her back by early next year. Will lenders give a lower rate if I remortgage for 25k without having any debt, since the loan would have been paid off beforehand?

I spoke to the bank and they say they can't advise on this.
Any help be much appreciated.

Thanks

Re-mortgaging does not clear debt. It just moves debt. You still owe the money just to someone else.

ideal_knowledge001

HappyMJ wrote: »

Re-mortgaging does not clear debt. It just moves debt. You still owe the money just to someone else.

What it will do for me is provide flexibility with my cash which I need atm, loan payment is nearly £500 per month, an increased mortgage will maybe cost me £200 extra per month.

kingstreet

ideal_knowledge001 wrote: »

My current rate is 2.4% but if I do remortgage the rate goes above 4% with the same lender (I am currently in a fixed term contract)

You aren't remortgaging, you are asking your existing lender for additional borrowing for debt consolidation.

This will be priced accordingly.

A real remortgage (new mortgage from new lender to repay old mortgage and loan) may actually give you what you want, a decent rate on all your borrowing.

However, you may have early redemption penalties to pay from what you say and consolidating short-term unsecured debt onto secured debt over a longer term may not be the smartest idea.

ideal_knowledge001

betmunch wrote: »

Your problem is being caused by speaking to the bank.

Speak to a broker that knows about debt consolidation mortgages and I would expect them to find you a more suitable bank with a fair rate.

Thanks for the input, I can't change bank because I am in a fixed term and early repayment fee is something like £5k+, but my current lender is willing to lend me more whilst I am still in a fixed contract with them.

Just needed to know if there is a way to lower the rate with the current lender. The lady at the bank said it is to consolidate debt that's why the rate is high, but she couldn't say if I clear the debt if the rate will be lower.

ideal_knowledge001

kingstreet wrote: »

consolidating short-term unsecured debt onto secured debt over a longer term may not be the smartest idea.

Thanks for the input, might be a silly question but can I ask why it wouldn't be the smartest idea? Is it because on the long run I will pay more interest?

Thing is I financially I am getting stuck so need to lower my monthly fixed costs so I need to go ahead with this and clear this loan.

I guess I may just have to stick to the higher rate.

kingstreet

Yes. You will drastically increase the interest you pay if it takes you 20+ years to repay a four or five year loan.

betmunch

ideal_knowledge001 wrote: »

Thanks for the input, might be a silly question but can I ask why it wouldn't be the smartest idea? Is it because on the long run I will pay more interest?

Thing is I financially I am getting stuck so need to lower my monthly fixed costs so I need to go ahead with this and clear this loan.

I guess I may just have to stick to the higher rate.

Ahhh, I see.

If you're not changing lender then you're limited to what they offer I'm afraid

chappers

kingstreet wrote: »

Yes. You will drastically increase the interest you pay if it takes you 20+ years to repay a four or five year loan.

Yep with even modest increases in interest rates you could find yourself paying almost as much in interest as the loan capital was to start with.
Also are there any early repayment penalties on the loan, which could increase your mortgage borrowing even further, not to mention fees on the new mortgage.