Are Abbey locking me in unfairly with their tracker mortgage?

heraldic

Hi there

Looking at the FSA website, I am now choosing between the following mortages:

Alliance & Leicester 4.75% (1yr) then 5.30%
Abbey 5.25% for full term
(all of these rates track the base rate +/- a margin.)

The Abbey mortgage is the more sophisticated of the two - it allows you to draw down extra funds as and when you want them (up to a limit).

What I am concerned about is that when I move (say in 5 years), _if_ I want to take out a new mortgage independent of this one, the new lender may say I still have a facility of (say) £150000 available. Whereas if I use the A&L mortgage (which still allows me to borrow back against my overpayments, but not draw down new funds), there will be no facility in place (apart from the unpaid part of my mortgage).

Details of the Abbey mortgage here:
http://www.abbeynationalforintermediaries.co.uk/mortgages/mort_flexplusCUS.pdf

So are Abbey effectively trapping you into their mortgage (which has a nice web interface, but perhaps not nice enough given the above).

Thanks for your comments, as my head is about to explode.

H

Hobo_2

No, you won`t be trapped, if you have a repayment mtg on an offset like this, it`s called a reducing facility usually so capital is payed off as you cannot borrow back as much yr on yr, interest only means the original sum can be drawn on every year so this is for the more disciplined of people.
Why offset, Ok if you can maintain at least 50% of mtg offset in savings if not & you don`t really need all those offset features, you can get better value discount mtg rates/deals & put any savings in cash ISA`s etc.
Eg:- 4.35% 2yr fix / 4.60% 5yr fix
do your own research though

heraldic

Thanks. I understood that in this particular mortgage (unlike others), they give you the facility to borrow up to 90% of the house's value.

What I am concerned about is that you could pay off say £100k of a £150k mortgage, giving you £50k to repay, but still have the facility to draw down say £100k. While this wouldn't be a problem for Abbey (they have the security of the house), it would surely put off the new lender (assuming you were to buy a 2nd house)?!

Thanks

H

mrcow

I'm not getting you? Are you implying that you'd have mortgages with two different lenders for the same property?

Or are you talking about owning two properties at the same time? With different lenders?

heraldic

Yep, the idea would be to pay off one of the mortgages as much as possible, and then take out another mortgage on another property (as a completely separate mortgage with separate lending criteria, which would take into account my monthly outgoings on the first mortgage) -- with a different lender.

What I'm concerned about is that my plans would be scuppered by the second lender seeing a £100k facility on the first mortgage - even though it wouldn't have been drawn down.

Any ideas?

herbiesjp

Would they both be residential mortgages or would one be a Buy to Let?

heraldic

I'd probably convert the first (which would originally be owner occupied) to a buy-to-let, and take out the second as owner occupied...

Fatboy_NSS

This would be a problem if you left the facility in place, but you could just tell Abbey to reduce the available credit limit. Alternatively take out the maximum you can on the Abbey mortgage, which would then reduce the amount you'd have to borrow on the new one.