Additional 'top up' mortgage - considering endowment. Advice needed!

glockdanny

My family is outgrowing houses as fast as we can get settled in them!

Basically, we are two years in to a five-year fixed rate with the Portman (3.99%!), but with two children now and with both of us wanting at least one more within 18 months, our three-bed, modestly sized semi is (I'm afraid to say) becoming rather cumbersome and cluttered.

To cut a long story short, we need £70K for a move to a bigger property, however, Portman want £6,200 as a redemption fee to get out of the current deal......fair enough, we knew that before we signed, but this whopping fee simply makes getting out of the mortgage a non-starter. Portman also say that they will not waive the fee, even if we take another product with them (despite two members of their staff contradicting eachother on this issue :rolleyes: ).

Our only option is to take out an extra mortgage to make up the necessary funds......however, a 70K repayment mortgage on top of what we have already is just a little bit to much pressure - it'll be a 'wake up in cold sweats' kind of burden. However, looking at the figures, we can afford the equivalent endowment mortgage repayments.

Now, I've always been dead against endowment mortgages (so are the senior members of the 'family' ), BUT, we are only really looking at going on one for three years. After three years, we can get out of both deals, lump them together and take whichever is the best deal on the market at that particular time......so I see this as less of a risk.

Hence my quest for knowledge. How user friendly are endowment mortgages in terms of redeeming them after just two or three years? Will we suffer financial penalty (redemption fees aside - I'll make sure we're out of any tie-ins) ?? We certainly would want to redeem it after that time (as above paragraph) but does this make any financial sense? We're a bit in the dark over this issue, I must admit.

Any help would be really appreciated. My Lucy and Jamie will be delighted to have more room to run around in.

Twopints

Personally I would not buy an endowment for mortgage repayment purposes, especially not for 3 years. Endowments are long-term products and you would lose a lot in up front charges on most (all?) if you are going to cash it in after 3 years. If you are not going to cash it in then I would consider it an investment and not linked to the mortgage.

If you mean an interest only mortgage then I don't see why you shouldn't go this route, and rather than an endowmnent put some money into a regular savings product.

Have you checked that your current mortgage is portable and can be ported to the new property?

glockdanny

Thanks twopints. You've captured it right there - I'm afraid that, other than repayment mortgages - I know very, very little. I can't even get the basic terminology right - yes it is an interest only mortgage we're interested in.

Yes, our mortgage is portable - but then the person that said that at the Portman is the same one who said the redemption fee would be waived. :rolleyes:

dunstonh

OK, is this a wind up?

It has to be unless you have been living on the moon for the last 5 years.

MarkyMarkD

I'm not sure that your situation makes sense. You can't afford to pay £xk at 3.99% and £70k at a new rate, so you propose remortgaging which would mean paying (£xk + £70k) at something around 5.5%.

Unless your existing mortgage is a trivial amount, if you can't afford the existing plus additional, you won't be able to afford the new mortgage either.

Twopints

Assuming that you can get an additional mortgage of £70k then at a rate of 5.5% and a term of 25 years an interest-only mortgage works out £110 a month less than a repayment (£320 v £430).

Can you afford an extra £320 a month ? You will also need a plan in place to pay the mortgage(s) off at some point and the £320 a month is interest ONLY i.e. you are not repaying any of the £70k.

(NOTE: I am not a financial adviser of any sort and the above is just my opinion / thoughts on this)

glockdanny

dunstonh wrote:

OK, is this a wind up?

It has to be unless you have been living on the moon for the last 5 years.

That's really helpful, thanks.

Tw*t.

I suppose you'd know about the moon, living in Norfolk - similar atmosphere.

glockdanny

MarkyMarkD wrote:

I'm not sure that your situation makes sense. You can't afford to pay £xk at 3.99% and £70k at a new rate, so you propose remortgaging which would mean paying (£xk + £70k) at something around 5.5%.

Unless your existing mortgage is a trivial amount, if you can't afford the existing plus additional, you won't be able to afford the new mortgage either.

We may wish to start the term again, in order to make the move affordable in monthly terms, do you not think?

glockdanny

Yup - told you I know nothing other than about repayment mortgages.

Interest only - clue's in the title, isn't it? You have to pay off the amount borrowed at the end of the term, and you invest in the meantime - theoretically to pay off the outstanding balance at the end of the term.

Schoolboy error really I suppose. I'd never bothered to find out how endowment or interest only mortgages worked as I'd been told by very trusted people in my earlier years not to bother with them.

Sorry to have wasted your time here.