Disadvantages to having multiple mortgages?

patchyX2

The fixed rate on my mortgage (~40k) ends in a couple of months.

In the next year or two I'm hoping to do some extensive renovations which will require me borrowing more money.

I could just go onto the SVR in the interim, but that works out quite pricey if I stay on it for any length of time.

The cheapest option is to jump on another fixed rate deal, but this would result in me eventually having two mortgages (as paying the ERC would be ££££). Aside from additional admin, are there other disadvantages in having multiple mortgages?

The alternative would be to get a tracker with no ERC's for the interim, but by the time you add the fees to the mortgage, the rate isn't that much lower than the SVR.

Hoenir

No disadvantage to having multiple sub loan accounts under a mortgage charge. 

housebuyer143

Why don't you remortgage now with the additional borrowing and then only have one mortgage? 

powerspowers

I have 2 small mortgages and found it useful when the rates went crazy as only half ended up on a higher rate. I do tend to stick with the same lender and not pay the fees  so it perhaps has cost a bit more over time. 

patchyX2

housebuyer143 said:

Why don't you remortgage now with the additional borrowing and then only have one mortgage? 

Because the new mortgage will be for ~200k, and the work might not start for a another year or two, so don't want to be paying a big chunk of interest unnecessarily. 

housebuyer143

patchyX2 said:

housebuyer143 said:

Why don't you remortgage now with the additional borrowing and then only have one mortgage? 

Because the new mortgage will be for ~200k, and the work might not start for a another year or two, so don't want to be paying a big chunk of interest unnecessarily. 

Fair, though depending on the rate you might be able to offset that by putting it in high interest account.

DullGreyGuy

patchyX2 said:

The fixed rate on my mortgage (~40k) ends in a couple of months.

In the next year or two I'm hoping to do some extensive renovations which will require me borrowing more money.

I could just go onto the SVR in the interim, but that works out quite pricey if I stay on it for any length of time.

The cheapest option is to jump on another fixed rate deal, but this would result in me eventually having two mortgages (as paying the ERC would be ££££). Aside from additional admin, are there other disadvantages in having multiple mortgages?

The alternative would be to get a tracker with no ERC's for the interim, but by the time you add the fees to the mortgage, the rate isn't that much lower than the SVR.

So two separate mortgages on the same property?

If it's the same lender it will normally be sub loan accounts and there is little disadvantages to that. 

If you want to go with a different lender then you will be looking at a second charge mortgage because your other lender already has a the first charge on the property. So if things go wrong the existing lender sells the house takes off what you owe them and passes what's left to the second charge lender, they take what they're owed and what's left is passed to you. That works when the fire sale of the property raises enough to pay off everyone but there are plenty of cases where there is insufficient funds so the second charge lender doesn't get repaid in full and so still needs to chase you. Because they are taking on more risk the rates on second charge mortgages are often not as good. 

patchyX2

DullGreyGuy said:

So two separate mortgages on the same property?

If it's the same lender it will normally be sub loan accounts and there is little disadvantages to that. 

If you want to go with a different lender then you will be looking at a second charge mortgage because your other lender already has a the first charge on the property. So if things go wrong the existing lender sells the house takes off what you owe them and passes what's left to the second charge lender, they take what they're owed and what's left is passed to you. That works when the fire sale of the property raises enough to pay off everyone but there are plenty of cases where there is insufficient funds so the second charge lender doesn't get repaid in full and so still needs to chase you. Because they are taking on more risk the rates on second charge mortgages are often not as good. 

Ah that's interesting. I was aware of the terms first/second charge, but I didn't realize that a second charge would result in worse rates. 

Hoenir

patchyX2 said:

DullGreyGuy said:

So two separate mortgages on the same property?

If it's the same lender it will normally be sub loan accounts and there is little disadvantages to that. 

If you want to go with a different lender then you will be looking at a second charge mortgage because your other lender already has a the first charge on the property. So if things go wrong the existing lender sells the house takes off what you owe them and passes what's left to the second charge lender, they take what they're owed and what's left is passed to you. That works when the fire sale of the property raises enough to pay off everyone but there are plenty of cases where there is insufficient funds so the second charge lender doesn't get repaid in full and so still needs to chase you. Because they are taking on more risk the rates on second charge mortgages are often not as good. 

Ah that's interesting. I was aware of the terms first/second charge, but I didn't realize that a second charge would result in worse rates. 

Principle is that the first charge holder gets paid first in full. The second charge holder therefore runs the risk of not getting fully reimbursed. 

Second charge holders cannot force the sale of the property without the agreement/cooperation of the first. 

Net result is that the interest rate charged is higher to cover the potential losses and administrative costs involved in the event of default.