Leave consent to let or remortgage buy to let?

jamels2

Hi, I let out a leasehold flat to a reliable tenant and have a consent to let from my bank. The debt is in two parts:
Mortgage 35k @ 3.64%
Overdraft (secured) 25k@4.74% (overdraft limit 40k)
Total 60k.
I could get a better rate on the 35k part through the current lender, but the overdraft rate won't change.
I have an offer from another bank for 126k +2k fee at 2.54% for a 2 year fix buy to let.
I am looking at extending the lease for about 20k and could either use the full overdraft limit or equity released from the re mortgage.
Do you think j should remortgage or not?
The consent to let I have had no time limit.
Thanks

ACG

You have £60k in debt.
You need £20k to extend the lease.
Thats £80k.

Where does £126k come from?

Dont get caught up in the rates too much, that £2k fee is pretty hefty on an £80k mortgage not so much on a £126k mortgage but I would stil be inclined to pay a higher rate and a lower arrangement fee personally.

jamels2

Hi there I requested 126k as its 70% of the property value so still leaves a decent deposit in the flat but also gives me more equity release.
I was either going to use the equity release for extending the lease or buying another property. With 126k I have both options.
Also they will add the 2k to the loan so I just pay 2.54% on it, total loan would be 128k.

ACG

But your payig £2k in fees, more if you add it.
With regards to the fee, its probably cheaper to get something that is £20 a month more but has no arrangement fee.

jamels2

I worked out I'm paying £205 interest now each month on £60k, if I borrow the £128k I'll be paying £270 interest.
That looks like a good deal? £65 a month more for over double the loan?

ACG

You need to compare what you can get with a fee and what you can get without a fee. Otherwise its a pointless comparison.

getmore4less

if you release the equity make sure you do it in a way that gets you the tax benefits.

ok looking at it an interest only basis, if on repayment they will be different.

£35k @ 3.64% £106.17
£25k @ 4.74% £98.75

Total £204.93
£60k @ 2.54% £127

add the fees but pay £205 and round up the overdraft to £99
in 2 years you owe.

£35k @ 3.64% £106.17 £35000
£25k @ 4.74% £99 £24,994
total £59994
£62k @ 2.54% £205 £60,186
The 17p makes less than £4.50 difference

so before you borrow extra a straight switch is not worth it.

if you need £20k for the lease but only have £15k extra overdraft available where is the other £5k coming from.

you need to do more numbers with the better deal on the £35k and with extra borrowing.

also depends on other plans like what you need the extra money for will you be overpaying etc.

borrowing extra money just because it looks cheaper than what you are paying now there must be more to why you want it.

silvercar

Remember tax benefits on mortgage interest are restricted to the value of the property when first let.

jamels2

Getmore4less thanks for your analysis, I don't think I realised the effect of the 2k fee.
If I stay with the current provider I can re mortgage the 35k with no fee for 2 year fixed @1.78% which is £52 interest a month.
If I extend the lease I'll have to max out the overdraft so 40k @ 4.74% which is £158 a month interest.
The other 5k I can get from wages and shares I am selling.

jamels2

If I am correct that means I can extend the lease (based on it being 20k) and only pay £5 more interest a month (£210 instead if £205). I think that may be the best idea, then concentrate on reducing the overdraft account with its high interest charge.