Remortgaging to Offset? Want to fund an extension

zacepi

Hi All,

My mortgage fixed term is ending in July and I can, due to an inheritance, pay the whole thing off without penalty. There's about £50k left on it and it's got 12 years left on the term.

The thing is I am planning to do some house development that will cost about £50k, so the obvious thing to do is to remortgage for £50k and use that on the house as a nice low interest loan.

If I understand offset mortgages correctly, then offset would be my best option, as my savings would help mitigate the interest.

There's one extra factor that I am considering. That is - I may not get planning permission, so my improvements may not go ahead at all, in which case I may want to pay off the mortgage.

Am I right in that an offset mortgage would be best in this case? One thing I haven't got my head around is that whether a current account mortgage would be better than a "savings" offset mortgage.

Thanks for any advice.

PS Am a higher rate taxpayer but not by much

glosoli

I think although may be mistaken that current account mortgages (CAMS) are mostly a withdrawn product now.

You may be able as you say to take the additional borrowing through an Offset product and only drawdown from the savings account if and when you require the funds, and if you don't need the funds could either continue Offsetting until the early repayment period expires or just repay it in full if there are no early repayment charges.

Just be aware that Offset mortgages work differently with different providers. Some reduce the repayment to reflect the fact no interest is being charged, and others keep the repayment at the full contractual amount (in which all would go towards the capital, i.e overpaying).

Lilla_D

Further to Glosoli's valid points, it depends on the lender where they would like to see the savings. Some insist on a particular savings account, others accept a number of bank accounts (current accounts included) to be linked to the mortgage and thus offset the balance.

zacepi

I have done some research and have a few options shortlisted including a couple of offsets and some low cost 2 year fixed (First Direct, Cov, YBS, Leek), but do any mortgage brokers think it's worthwhile using a broker?

I would be happy if one on here wants to contact me by a PM, if that's allowed.

zacepi

Assuming I can meet what I understand are some tough requirements for FD mortgages, what's the thought about this one:

mortgages.firstdirect.com/mortgage-rates/product/life-tracker-repayment-fee-saver-22#repayments-fees

Seems unbeatable for flexibility and rate for my relatively small mortgage. Obviously depends on interest rates not rocketing but that seems unlikely.

thanks!

SavingSteve

Look into Coventry's flexx for term. They'll pay your fees and there's no 'fixed' period, so if your circumstances change you can pay down. Beware that it is a variable rate (not officially linked to the base rate, so could be changed whenever Coventry like, the past is not an indication of the future, but in the recent past Coventry have moved these rates only when the base rate changes)

zacepi

Thanks Steve.

A quick look shows there aren't any Flexx for Term remortgages with no fees (least I found was £499) so wondering if I have missed something or you know something I don't?

SavingSteve

Sorry, I meant pay your legal and valuation fees. You are right that minimum product fee is 499

dimbo61

Well you have permitted development and you could apply for full planning permission.
You will know before July if you can build your extension.
Time to read up or contact local planning office.
What does your existing mortgage revert to at the end of the fix ?
SVR or some kind of tracker deal ?
Check on your current lenders website what offers they have for existing customers.
Perhaps a nice tracker deal with no ERC,s
Why go to the expense of moving lenders or getting an offset Mortgage