Remortgage Vs Further Advance

Lungboy

I'm completely new to the world of remortgaging so I just wanted to make sure my thinking on this is correct. We currently have an ~£80k mortgage at 2.39% with 14 months left on the introductory deal. ERC is 2% and drops to 1% in November. We're thinking of converting our loft, possibly a full hip to gable number with dormer, and would need extra money from the bank for this, say £50k. Current LTV is 35% and I recently had a small payrise so affordability should be fine and we'd still be sub 60% LTV so hopefully get decent rates. I've looked at the further advance offers from our bank and they seem very steep, 2.99% for 2 years or 3.04% for 5 years. I *think* it's fairly clear that a full remortgage to a new lender (waiting 2 months to get the ERC to 1%) like the Co-op platform at 1.94% plus £250 cashback and zero fees is a much better option over the 2 or 5 year term of the further advance. Am I correct? Have I missed anything?

heston2014

Lungboy wrote: »

I'm completely new to the world of remortgaging so I just wanted to make sure my thinking on this is correct. We currently have an ~£80k mortgage at 2.39% with 14 months left on the introductory deal. ERC is 2% and drops to 1% in November. We're thinking of converting our loft, possibly a full hip to gable number with dormer, and would need extra money from the bank for this, say £50k. Current LTV is 35% and I recently had a small payrise so affordability should be fine and we'd still be sub 60% LTV so hopefully get decent rates. I've looked at the further advance offers from our bank and they seem very steep, 2.99% for 2 years or 3.04% for 5 years. I *think* it's fairly clear that a full remortgage to a new lender (waiting 2 months to get the ERC to 1%) like the Co-op platform at 1.94% plus £250 cashback and zero fees is a much better option over the 2 or 5 year term of the further advance. Am I correct? Have I missed anything?

We've gone through a broker for ours as our Fixed term ends next month. We got 1.68% for 3 years fixed with a product fee of £995. When I contacted our lender to enquire directly, I was given 2.94% for 3 years and 3.44% for 5 years. We are borrowing additional 40k on top of our 85k mortgage with the intention to pay off over 5 years. We decided to stay with the same lender but I'm sure there are more competitive rates elsewhere but it's easier and quicker for us to stay with the lender since we also bank with them.

MortgageMamma

A broker can do a spreadsheet for you to compare the benefits of staying where you are on your current rate and taking a further advance on say standard variable rate (then switching it all to one rate when your early repayment charge finishes) - work out the costs for that, vs the total costs of the product transfer now including the early repayment charge

you can't really factor future rate changes into the equation - i.e. know what the rate would be if you took a further advance and "rejoined" the two sub accounts in future, so you have to work off what is financially more beneficial now.

Always take the cheapest option in the long term if you can afford to, even if it involves a bit of faffing about with paperwork

Lungboy

heston2014 wrote: »

We've gone through a broker for ours as our Fixed term ends next month. We got 1.68% for 3 years fixed with a product fee of £995. When I contacted our lender to enquire directly, I was given 2.94% for 3 years and 3.44% for 5 years. We are borrowing additional 40k on top of our 85k mortgage with the intention to pay off over 5 years. We decided to stay with the same lender but I'm sure there are more competitive rates elsewhere but it's easier and quicker for us to stay with the lender since we also bank with them.

Ok so that sounds almost identical to our situation. Good to hear we're on the right track. I didn't realise you could remortgage with the same company though, assumed it would have to go elsewhere.

MortgageMamma wrote: »

A broker can do a spreadsheet for you to compare the benefits of staying where you are on your current rate and taking a further advance on say standard variable rate (then switching it all to one rate when your early repayment charge finishes) - work out the costs for that, vs the total costs of the product transfer now including the early repayment charge

you can't really factor future rate changes into the equation - i.e. know what the rate would be if you took a further advance and "rejoined" the two sub accounts in future, so you have to work off what is financially more beneficial now.

Always take the cheapest option in the long term if you can afford to, even if it involves a bit of faffing about with paperwork

We will get our broker involved once we have some ballpark figures for cost from the structural engineer and loft conversion companies, but probably wouldn't have bothered if going for a further advance.