Top Mortgage Loophole

biglugs

Unfortunately they probably didn't think the people of Loughborough would be clever enough to see the flaws in their plan??

Scr00ge

Now, to change tack slightly...
I can see how the whole thing works and it sounds like a great deal.
But I am considering moving house in the next 3 years, and I intend to increase me mortgage for this. However, it scares me to think that I would be increasing my mortgage based on 6.1%, and switching to a different mortgage within the 3 years means they can ask for all the cashback back again!!!

However, it does say that the early repayment fee will be waived if I take out a replacement loan with the society. Does this mean that I could switch to one of their other mortgages within the 3 years and not have to pay the cashback back to them???

Furthermore, their other mortgages may have no tie-ins, so I could then move on from this one to a different provider completely...???

Any ideas?

scrooge_mcduck_4

i have a mortgage of £75k and a house worth about £100k. Therefore I could get cashback on a £90k mortage, and therefore a cashback profit on £15k (i.e. 90k - 75k) which would give me a £1050 cashback profit (plus a 3 year mortgage rate of 3.77%)

Correct?

biglugs

Does this mean that I could switch to one of their other mortgages within the 3 years and not have to pay the cashback back to them???

I wouldn't worry - if they get even a tenth of the number of applications for this as Argos did for their tellies then the society won't be there in 3 years anyway!

biglugs

i have a mortgage of £75k and a house worth about £100k. Therefore I could get cashback on a £90k mortage, and therefore a cashback profit on £15k (i.e. 90k - 75k) which would give me a £1050 cashback profit (plus a 3 year mortgage rate of 3.77%)
Correct?

Less any society booking fee, application fee, legal fees, redemption fees etc. Would probably only be worth it if people in these circumstances were going to remortgage anyway?

machofairy

Please help me on this ....... just need to keep it simple...

I am owing about £28000 on my house, worth £100,000
My tie in ends THIS MONTH (yippee!!)

We are in a position to be able to pay it all up now.

So, if I remortgage for £90,000, then
- take the cashback
- then pay back £89,000
- leave £1000 to be paid back over the 3 years.

Will this work or am I missing something?

thanks in advance

peoplesrepublican

Many thanks to Martin, firstly for posting this, and secondly for adding more detail for luddites like me! This is the first time I have been stumped by one of his tips, very annoyed with myself!

I now have an interesting example, with figures, could someone check over these and see if they add up please? Or even if they just look right. My problem with this is that I can't make the increased payments (for the much higher mortgage borrowing) without keeping back some of the extra borrowed capital, plus the cashback, to use for repayment money. So it breaks down like this (using the bbc calculator):

With a, say, 4.8% for 3 years rate on my current mortgage with 54K owing, I will pay £7,776.00 interest and £5K capital, leaving me with just under £49K left at the end of 3 years.

If I took this mortgage, at £99K, the monthly payments would be around 725. So assuming that I would need to find an extra £350 per month (could find the other £375 no problem), I would need to get hold of £350 * 36 = £12,600. I could make this up from almost £7K cashback, plus keep £6K back of the new capital - pushing my outstanding mortgage balance to £60K. But since the payments are £725 per month, with the interest only £305 per month, the total interest is £11,285, with the capital paid being £15,540 - leaving me with £4.5K less capital overall at the end of 3 years than with the previous mortgage.

Does that make sense?

peoplesrepublican

I am owing about £28000 on my house, worth £100,000
My tie in ends THIS MONTH (yippee!!)

We are in a position to be able to pay it all up now.

So, if I remortgage for £90,000, then
- take the cashback
- then pay back £89,000
- leave £1000 to be paid back over the 3 years.

Machofairy,

This is correct, except where will you get the £89K from? When you borrow the £90K, your current mortgage company will want £28K of it, leaving £62K, plus any cashback. However, if you have the cash in reserve somewhere, great, it looks like your numbers add up!

Hungry4bargains

Very interesting gain - only downside I can see is if you don't (can't) pay off a large portion of the capital quickly. With the current inflationary pressures caused by oil (and therefore potential increase in interest rates) to push up their normal variable rate (6.1%) may give a considerable risk. However I guess that puts the whole housing/mortgage market in question!

Make sure whoever takes this up - reads the small print carefully - Not for me I'm afraid I've got a fixed rate!!

Sooler

What's the deal with the required insurance,

http://www.theloughborough.co.uk/mortgages/brochure/details.asp?id=84
states ...
"Insurance - The arrangement of suitable buildings insurance is a condition of any mortgage offer made. There is an administration fee of £30 should you decide to insure your property with another provider."

I compared 2 quotes and got ...

Buildings and Contents:
Loughborough = £172
Same cover from Churchill = £127

So it'd be better to pay the £30 admin fee.