How best to re-organise mortgages

sequin123

Hi, I am looking to move in the next 6-12 months and currently have 2 mortgage accounts from our first house and current house. We are looking to borrow more and I am just trying to work out the smartest way in which to do this.  Our current status:


42,000 Ends 2030 - a lifetime tracker @ 0.79 over base rate (monthly £820)
42,000 Ends 2036 - 5 year fixed rate until 2028 @ 3.98 (monthly £390)

New House
750,000 - purchase price
550,000 - expected sale price

Savings 
75,000 - to cover stamp duty and any possible renovations

Combined Income £120k 

I can't work out whether it would be better to consolidate the above 84k and add it to the new mortgage or to keep them and just borrow the extra needed (around 200k) as a 3rd mortgage.  I am sure there is some logic here or better ways to cut this I just can't get my head around it and also conscious I am early fifties, my partner is late 40's.


Thank you!

grumpy_codger

sequin123 said:

...
I can't work out whether it would be better to consolidate the above 84k and add it to the new mortgage or to keep them and just borrow the extra needed (around 200k) as a 3rd mortgage.  I am sure there is some logic here or better ways to cut this I just can't get my head around it and also conscious I am early fifties, my partner is late 40's.
...

I don't understand the question.
You owe 84K and need to borrow about £200K extra.  

For the fixed rate you have to pay the ERC to 'consolidate' it. Unless you can get a new rate much lower than 3.98% it makes more sense to port it.

For the tracker it depends on what type of new mortgage you want and can get. If it's tracker again and with a lower rate, it does make sense to 'consolidate'. If it's tracker with higher rate consolidation makes no sense. If it's fixed rate you have two options and the decision depends on your forecast of the base rate in the years to come.

sequin123

Thank you for your reply, apologies if I wasn't clear.  But yes looking to move and the new house will be around 750k so just wanted to know the best way to do this given we have 84k outstanding in mortgages on our current house. If I didn't consolidate and ported if I have worked this out correctly:

1st mortgage £820 pcm 25yr term ends 2030
2nd mortgage £390 pcm 25yr term ends 2036
New borrowing needed to move £1109 15yr term ends 2040 (based this on 200k @ 4% over 15yrs)

So new monthly payments would be below. 

£2321     2025 - 2030
£1501     2030 - 2036
£1109     2036 - 2040

£2321 seems a lot as a mortgage payment albeit only for the next 5 years, perhaps I am out of touch having been fortunate to join the housing ladder early on.

Any input greatly appreciated or if I have missed something in my calculations....

Hoenir

sequin123 said:

£2321 seems a lot as a mortgage payment albeit only for the next 5 years, perhaps I am out of touch having been fortunate to join the housing ladder early on.

Borrowing a large amount and repaying it over a short period of time will jack up the monthly repayment considerably. 

If you did borrow £284k at 4% over 15 years. You'd be charged some £94,000 in interest.  

Interest rates have normalised as the post GFC era has well and truly ended. 

amnblog

From what you have said it seems the mortgage product issue is secondary.

If £2,321 pcm is too much for your budget you need to work out the mortgage term you need first - this will then sort the budgeting.

With regard to the porting, the fixed rate is worth keeping the base +0.79 is not going to do you any favours to retain (assuming there are no early redemption charges on it).

You port the product, not the mortgage, so currently set remaining mortgage terms are adjustable.