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How to manage a 2-part Mortgage
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Posts: 10 Forumite
Hi,
Some back story, myself and SO moved home last year and we've ended up with a 2 part Mortgage.
Mortgage amount: £271k
Loan Part 1: £129k
Loan Part 2: £142k
Loan part 1 ends in Nov 2022 (2.05%) but can lock in a new fixed rate now, to go active in Nov.
Loan part 2 ends in Aug 2026 (1.65%).
I want to merge these 2 parts to be able to switch providers in the future, as well as not having to pay 2x fees for more attractive rates. As it stands I'm with santander and they do not have the most competitive rates at the moment.
I believe my options are:
1) sit on Loan 1 SVR until Aug 26.
2) take out 2yr fix, then another 2y fix to bring Loan 1 end date to Nov 26, and SVR for Loan 2 in the few month interim.
3) Take a 7yr fix on Loan 1, then a 3y fix on Loan 2 so they both end on 2029.
Note all these fixes are currently 3.14% with Santander (where other players offer around 2.8%).
Im leaning towards option 3, however it's a very long timescale. Option 1 is too risky in terms of interest rates rising (I suspect BoE rates will go to 3% in the next year or 2), for the same reason option 2 may mean very high rates for the 2nd of the 2y fixes.
Do I have any other options other than trying to marry up the end dates? I feel there must be another way... I was never told the loan parts would be this messy & essentially keeps me with santander no matter what they choose to offer.
Additional notes:
Currently at 62% LTV - I've checked and I'd need to pay £12k to bring the rates down by a meager 0.05%.
I am basing my choice on what I believe BoE base rate will go to over time (increase until 2024, stabalise and who knows after that).
We have 2 young kids so knowing what we pay each month is important to us, another reason why we heavily favour fixed rates.
Cheers
James
Some back story, myself and SO moved home last year and we've ended up with a 2 part Mortgage.
Mortgage amount: £271k
Loan Part 1: £129k
Loan Part 2: £142k
Loan part 1 ends in Nov 2022 (2.05%) but can lock in a new fixed rate now, to go active in Nov.
Loan part 2 ends in Aug 2026 (1.65%).
I want to merge these 2 parts to be able to switch providers in the future, as well as not having to pay 2x fees for more attractive rates. As it stands I'm with santander and they do not have the most competitive rates at the moment.
I believe my options are:
1) sit on Loan 1 SVR until Aug 26.
2) take out 2yr fix, then another 2y fix to bring Loan 1 end date to Nov 26, and SVR for Loan 2 in the few month interim.
3) Take a 7yr fix on Loan 1, then a 3y fix on Loan 2 so they both end on 2029.
Note all these fixes are currently 3.14% with Santander (where other players offer around 2.8%).
Im leaning towards option 3, however it's a very long timescale. Option 1 is too risky in terms of interest rates rising (I suspect BoE rates will go to 3% in the next year or 2), for the same reason option 2 may mean very high rates for the 2nd of the 2y fixes.
Do I have any other options other than trying to marry up the end dates? I feel there must be another way... I was never told the loan parts would be this messy & essentially keeps me with santander no matter what they choose to offer.
Additional notes:
Currently at 62% LTV - I've checked and I'd need to pay £12k to bring the rates down by a meager 0.05%.
I am basing my choice on what I believe BoE base rate will go to over time (increase until 2024, stabalise and who knows after that).
We have 2 young kids so knowing what we pay each month is important to us, another reason why we heavily favour fixed rates.
Cheers
James
0
Comments
-
What would your ERC be on the 2nd part in November?
If the rates elsewhere are that much lower it might be worth paying that and moving as 1 mortgage to someone else?0 -
Appologies for the late reply.
ERC is 5% (7k), as this is on 1.65% until 2026 interest it would not be worth it.
Thanks for the reply!0
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