Top Mortgage Loophole

MSE_Martin

Hi folks, I've added some details to the original post including a work out whether you gain. If you have any suggestions on how to make it easier to explain (im getting tired) please do send me a PM

martin

plumb1_2

will this have to be paid if going direct?

For this product a procuration fee of 0.35% of the advance will be paid upto a maximum of £1,500.00. This fee will be paid to the introducer in the month following completion

polarbearit

plumb1 wrote:

will this have to be paid if going direct?

For this product a procuration fee of 0.35% of the advance will be paid upto a maximum of £1,500.00. This fee will be paid to the introducer in the month following completion

I thought this was the fee a financial advisor would be paid for getting you signed up to the mortgage - my union pay 50% of such fees back (or similar)to the applicants when using their financial advice co to buy insurance products - not sure about mortgages though I'll check this tomorrow!

Ruthann

Possibly having a case of blonde-girl-itis but i can't work this out at all, even with the guide. We owe 164,000 on our mortgage which is at 5.49% with the Nationwide. We have 24 years to go overall. We would have to pay an extra 1500 (approx) to redeem this.

So if we borrowed 165,500 from this deal we would get 10K, and then pay that off, we would owe 155,500.

Looking at my mortgage papers we pay 1028.82 a month, so over 3 years this is £37,037.52

But 3 years at 6.1% on 155,500 costs us £37,514.16 (using the bbc website, if I have used it right)

So this is not a good deal for us. Have I understood this correctly? Or is there a bit to the equation which I am missing? Should I be comparing these two figures (37037.52 and 37514.16)?

Very confused - any help appreciated.

MarkyMarkD

Ruthann

It's ONLY really worth doing if you can borrow more than you need.

For every extra £10,000 you borrow, you get £700 cashback (7%). You can then repay the extra borrowing straight away and never pay any extra interest.

You only have to pay 3.77% AER on the amount you actually need, over the three years - which is in itself a good rate, but probably not good enough to pay penalties and moving costs on an existing mortgage for.

But, in order to able to borrow "more than you need" you need:

(1) equity in your existing property - 90% of your property value has to be more than your present mortgage, as that's all they will lend you;
(2) income to support a "more than you need" mortgage - which again will be a problem for many people.

On the figures you provide, Ruthann, you ARE missing something. Whilst the cost over the three years is similar, you would owe a lot less at the end of the 3 years on the new mortgage compared to your current mortgage - something like £8,500 less (if you kept the payments equivalent). That is also equivalent to the difference between Martin's 3.77% on the new mortgage and the 5.49% on the old mortgage = £8,500.

But the reason this deal works for you isn't that it's a particularly good deal for you - it's that your current rate is very poor indeed! You could switch to almost any other "best buy" mortgage and pay far less than you are paying - even though you're tied in and have a £1,500 penalty. When does this penalty run out, by the way? Presumably in about a year's time?

Ruthann

Thanks MarkyMark (I had such a crush on the real MarkyMark for ages <swoon>).

Doh! Hadn't thought about the fact we would owe less at the end. We really like fixed rate though, and when we got this a year ago it was quite a good rate at the time. We do have a year to go before the penalty runs out, you're right there. The house is worth around £230,000 and last year we were offered up to £175K mortgage with Nationwide, so I assume we would earn enough for this one.

I don't see how borrowing more than we need would help, as we can't get more than 10K whatever we borrow over our actual mortgage.

Still not really sure from your advice if we should go for it or not? H is away with the TA at the moment, so can't even talk it over with him.

Thanks for the thinking points.

robowen

I'm not very good with the figures here...

Can someone kindly tell me if it's worth me doing or not ??
I'm looking to remortgage.
I've just come to the end of tie-in and owe £35,500.
House value around £230,000.

If you have to borrow £165,500 to get the £10,000 cash back, you would need to be earning an average of £66,200pa EACH :eek: That's 2.5 times joint wages..right ?

What sort of salary would I need to earning to make it worthwhile ?? After all your salary dictates how much you can borrow...right ?

rob

thaylock

mmmmm, interesting proposition, need to think about this 10k deal.

I currently have an offset mortgage which I also use as a stooze pot, over 3 years I don't think I would be that much better off considering the savings I am making due to savings & stooze pot (normally yearly interest would be £7500, but I only pay about £1000). Still tempting to switch back to normal mortgage. Have to think carefully about this one.

biglugs

Ohhh....... I don't have a mortgage, paid it off and transferred to 0 %credit cards.

Then why don't you take out a massive mortgage, get the cashback then pay back the mortgage to say a nominal £1000 and pay that back over 3 years.

Can I point out (spoilsport) that since the sale of mortgages is regulated by the Financial Services Authority that the giving of advice about any specific mortgage to an individual without being authorised is a criminal act

Also - the Loughborough is not a huge business run by greedy fat cats ripping off an unsuspecting public. It is a mutual society run for the benefit of its members, so those moneysavers grabbing this bargain might like to consider how many grannies' savings accounts they will be raiding in taking advatnage of what is a blatant C**K up on their part. I wouldn't be surprised to see this offer being pulled very quickly once they get a massive uptake!

Mind you this might be all sour grapes since I've just signed up to a 5 year fix and my mortgage is massive

thaylock

biglugs wrote:

Also - the Loughborough is not a huge business run by greedy fat cats ripping off an unsuspecting public. It is a mutual society run for the benefit of its members, so those moneysavers grabbing this bargain might like to consider how many grannies' savings accounts they will be raiding in taking advatnage of what is a blatant C**K up on their part.

They don't deserve to be in business if this is a C**K up, they should shut up shop now if they are willing to put other peoples funds at risk !