What options do we have?! Are we trapped?!

wingit247

Hi all, grateful for any help/ advice. We currently live in a 2 bed house which we love and we love where we live. However with us and our little one we are rapidly running out of room!
Before our baby was born our mortgage deal ended so we took a new rate and fixed for 10 years. It is a good rate and we wanted to know what we were paying so we were secure. We were told at the time there wouldn't be much risk as you can port mortgages. 
Since then our financial position has changed in that my husband is our main earner still however where I was initially full time employercas well, I became a full time mum, but from next week will have a few hours in a new job, it won't pay loads but it will be something. 
The issue we are experiencing at the moment is that our current mortgage lender would offer us a top up mortgage but over an extremely long period e.g. 40 years! However if we were new customers we would be allowed to borrow more than what our initial mortgage was years ago when our combined income was less than my partners current income. 
We feel like we are a bit trapped as to be able to borrow more over a realistic term it seems the only option is to pay an early exit fee which is around £17,000!
Does anyone else have experience in this sort of situation and could let us know what options we might have. Or be able to recommend where we could go for advice?
Many thanks 

haras_n0sirrah

Who is your current lender?
If they will only offer the amount over a longer term (I would check that as most lenders dont have separate borrowing for new and existing borrowers) then can you take a longer term and overpay? Most lenders have a 10% overpayment allowance

DayDreamerandGeneralWaster

Well just because the term is 40 years doesn't mean you have to take 40 years to pay it. Ask about overpayment charges and see what you can manage to pay to reduce the term. 

getmore4less

lacking a bit on details like amounts, LTV, rates and terms of what you have and what you want.


£17k will be quite a large overpayment pot to be working with.

wingit247

Current property was bought for £150,000 estimated sale value is £210,000, we have £107,000 outstanding on our current mortgage. Hoping to buy a property for £250,000 roughly. 
Currently a capital repayment mortgage. 2038 is current repayment date. Current rate is 2.79%. We signed up to this in June 2019 so 8/9 years left of the fixed deal. Dont know if this detail helps. Would prefer not to say who the lender is.

wingit247

Also sorry typo, exit fee is £7000 so still a lot and current deal allows 10%  overpayments

getmore4less

say around £100k equity and need £150k 
throw in some costs  means you are looking for a top up of around £50k on top of your current mortgage and new LTV around 60%, would be good if you get it to that and not go over.

What rate will your lender offer you for the ~£50k top up?

You then compare that to other options borrowing ~£157k (erc added).

eg With your current £107k  18years full term at 2.79%
there are 5y fixed around 1.5% add the ERC and compare over 5 years.

amount	rate	payment	owing	interest
£107,000.00	2.79%	£630.69	£82,440.42	£13,281.78
£114,000.00	1.50%	£630.69	£83,601.95	£7,443.31

 You can not recover the £7k ERC over 5y on current lending but with the extra money and what rate you get for that you might.

ACG

I am guessing you mean they will lend you less as your current mortgage is over say 25 years and the top up would be over 40 years, where as if you were a new customer you could get more if you did it all over say 35 years? Because lenders do not lend less to existing customers than they would new - it is one calculator they use. 

However, as has been suggested, you can do it over 40 years and then just over pay the bring the term down quicker? 

wingit247

Hi ACG, yes sorry didnt explain that very well. Thats right the top up is less but over a larger term. OK will bear the overpayment in mind, might be an option.They did mention we could ask to reduce the term in the future, apparently there is no charge for this but there is also no guarantee they would agree to reduce it.

MovingForwards

You don't need their permission or ask to reduce the term, making overpayments naturally brings the term down.

Many of us take longer terms, do overpayments to clear the mortgage in the timeframe we want and never even contact the lender.

Just be aware of the T&C's of your mortgage, be careful to make sure you only pay upto the maximum each year to avoid ERCs and monitor the direct debit to make sure they haven't reduced that because of your overpayments.

Don't overthink this, don't over complicate it. It's quite straightforward.

ACG

An alternative to overpaying could be to put the money you are "saving" into a savings account. 
Lets assume your repayments over 25 years would be £200 a month but £175 over 40 years, bang the extra £25 in a savings account and then in 25 years there should be more or less enough to clear the balance (depending on the rates charged/given on the mortgage/savings accounts). There is more than one way to skin a cat as the saying goes.