Remortgaging advice on fixed term

moliver_93

Hi all, looking for your thoughts please. 

Partner and I have been in our property for over a year now. In very different positions, as he put down 350,000 as a deposit, I put down nothing and I pay the £148,000 mortgage property est value £500,000. mortgage at a fixed rate of 5.23% for 36 months (with 21 months remaining) on a 30-year term. I'm also overpaying by £150 per month which comes to £1,000. Mortgage with generation home as it tracks both of our equity which is helpful. 

I’m looking to borrow an additional £50,000 for reno work (he has savings for anything hell put into the reno) I've had a look at the documents from gen h and the early repayment charge is £3,985, decreasing to £2,612 next June. I’ve noticed rates are coming down, and I could potentially borrow £200,000 at around 3.88% over a 25-year term with similar monthly payments. just wondered what your thoughts are or if you think its a bad idea! Perhaps it would be better to get a second mortgage?

thanks in advance.

tacpot12

I assume there is a typo in the post. Where you said in brackets "with 21 months remaining" I think you might have meant "with 21 years remaining". This makes a big difference!

You need to compare the cost of financing the renovation work via further mortgage lending, via a personal loan and via a loan from him if he has more funds that he needs for his share of renovation. 

The first rule is always that you want to borrow the least amount of money for the shortest possible time to minimse the amount of interest paid.

The second rule is that you want to avoid secured lending if you can borrow what you need on an unsecured basis.

Factor in any Early Repayment Charges to the calculations for each option you are considering.

amnblog

The differences in the two rates on the current borrowing is worth about £167 pcm.

Change the rate next month and you may save £1,336 before the end of June. You will have paid £1,373 more on early redemption charge by breaking your contract now rather than waiting until 1st July. So you gain nothing.

Each month between now and the end of June it costs you more to break the rate than you will save.

moliver_93

amnblog said:

The differences in the two rates on the current borrowing is worth about £167 pcm.

Change the rate next month and you may save £1,336 before the end of June. You will have paid £1,373 more on early redemption charge by breaking your contract now rather than waiting until 1st July. So you gain nothing.

Each month between now and the end of June it costs you more to break the rate than you will save.

Thank you for this - forgive me for being dim, but the sooner the better in terms of switching to the new mortgage is what you are saying? 

amnblog

moliver_93 said:

amnblog said:

The differences in the two rates on the current borrowing is worth about £167 pcm.

Change the rate next month and you may save £1,336 before the end of June. You will have paid £1,373 more on early redemption charge by breaking your contract now rather than waiting until 1st July. So you gain nothing.

Each month between now and the end of June it costs you more to break the rate than you will save.

Thank you for this - forgive me for being dim, but the sooner the better in terms of switching to the new mortgage is what you are saying? 

I am saying no benefit now, and reducing benefit from here. Clearly the closer to the point your early repayment charge reduced the less time you have to make a saving on interest.