Borrowing more on existing mortgage

saver2019

Hi,
I am on 2 years fixed mortgage (loan amount £152k) with Santander’s where the term had started Aug 18. My current LTV is about 29%. I am thinking of borrowing more from Santander’s about £55k to raise for either existing home extension or as deposit for purchasing a buy to let property. I spoke to Santander n they r happy to lend this additional money £55k for 2 years fixed mortgage for home improvement .. My question is:
Given that Santander said they will treat this new mortgage (starting March 19, fixed for 2 years) as completely separate mortgage to existing one, what will happen to my second mortgage after my first mortgage term is finishing in Aug 20 and I want to switch lender for better interest rate? Can I switch first mortgage to new lender but keep second with Santander’s to avoid any ERC? What are the suggested options to borrow more in this case?

Second , Is it lcommon to borrow this additional money for purpose of home improvement at application process say house extension but later if change mind, actually don’t do the home extension, instead use as deposit money for buy to let? Once I get the money, Do I have to let lender know that I changed my mind n instead using the money to purchase a property?

Thanks in advance.

Lilla_D

Let's take your questions one by one:

- When your original mortgage deal ends in Aug 2020, the further advance deal will continue running until March 2021, unless you remortgage the whole lot into 1 new mortgage with a new lender and pay the ERC for the 2nd part.
- You can't remortgage the first part to another first charge mortgage lender and keep the further advance to avoid the ERC, as Santander will want to keep their first charge. If you remortgage the original part only, it may be possible to use a second charge lender at a higher rate, but it'd be an unusual solution.
- You could just let the original mortgage part revert to the SVR until Mar21 and then remortgage the whole lot, but it'd mean paying at a higher rate during the Sep20-Mar21 period.
- Thinking more practically, if your ERC is 2%, then your cost is £55k x 2% = £1100 or if it's 3%, then £1650. Compare this ERC cost to reverting to the SVR for 7 months and to taking a second charge and you may find that you'll just take the hit and pay the ERC.
- No one checks how you spend the money and you don;t have to inform the lender if later on you change your mind. Having said this, you should obviously do the right thing and if your intention is to use the money for a new property purchase, then you shouldn't say that it is for home improvements.
- How common it is that people say one thing and then do another? Since no one checks what happens after the money is released, it's difficult to tell...

I hope the above helps.