Advice on additional borrowing on mortgage

Steve_Ross

Hi, Im looking for advice on additional borrowing on my mortgage

We just need £30000 for extension and want to use £4000 of it to pay off a existing loan

Why has the banks mortgage advisor split this into 2 separate products?
Product 1: £26000
Product 2: £4000

They both have the same interest rate for the same length of time with the option of overpayments

Why haven't they just give us 1 product of £30000?

Do they do this so they will be getting more in interest over the term by splitting the products?

Thanks

[Deleted User]

Steve_Ross wrote: »

Do they do this so they will be getting more in interest over the term by splitting the products?

How would that work?

[Deleted User]

There are multiple reasons for doing this. I dont know what bank you are with so i will use 1 example so you can get an idea of why it might be done.

Some banks have policies on debt consolidation where you can only consolidate debt on to your mortgage once every 10 years.
If you apply for a loan to consolidate debt they can look at your account history and see that under the column for debt consolidation you did this 8 years ago they will refuse.

It was all lumped in together they wouldnt be able to tell

LRmortgage

2 different reasons for borrowing so they have split into 2 accounts.

At a guess I would say this might be with HSBC?

Nothing to worry about, same rate, same term I presume? If so, it’s an admin thing at the lender rather than you being charged anything extra.

haras_nosirrah

halifax do this
may be e.g. 4k debt consolidation and 26k home improvements

you have to split it into the different elements even though the product is the same

[Deleted User]

Natwest do it as well.

Loads of lenders do it. Nothing sinister at play here

Mortgage_Adviser

HSBC used to doe this when I worked for them back in the day. The explanation was that there neeed to be a clear split between the money used for the house and the money used for anything else. This was because if it ever came to claiming the benefits for the mortagge interest the state would only pay you for the interest that is there for the mortgage that is theere because of the house purchase . I was told the state would not support you on the part where the money was borrowed for other needs.