Additional borrowing on mortgage - what happens when first mortgage fix ends?

[Jimbo Mahoney]

We have two years left to run on a five year fix.

We're thinking of borrowing more (from the same lender), which will consist of a separate amount fixed for five years.

I'm clear with everything except what happens when the fixed period ends on our main mortgage? We'll still have three years to run on the additional borrowing.

I'm assuming that they are effectively two separate loans secured on the property and we are free to remortgage with whoever we want for the main mortgage, despite having a smaller loan with our existing lender...

But perhaps another lender isn't going to like that smaller loan being with someone else and we will be restricted in choice and/or stuck with our lender's SVR for the main mortgage?

The documentation isn't clear on this (I will ask the lender, but it's the weekened and I'm sure others have done similar and may know!).

 

[happy_2008]

You will have two mortgages with the same lender on different end periods which will make it hard for you in future to switch to another provider. Once your original mortgage deal has ended you will have to renew the deal on stay on the normal SVR

 

[Jimbo Mahoney]

Thanks.

Both parts are for 22 year terms.

The main part is fixed for the next two years (60% of the value of the property).
The smaller part (additional borrowing) is fixed for five years (14% of the value of the property).

So you're saying that in two years time, when we remortgage the main part, the fact we have a smaller part will put other lenders off?

I was expecting them to see it as a ~75% LTV remortgage (rather than the actual 60% because we have borrowing on a further ~15%) but I can see how they might be put off or our choice of lender restricted.

Intrigued if anyone else has experience this situation?

 

[happy_2008]

It will be hard for you to try and align them to end on the same day unless you pay a ERC when you switch.

 

[{SAS}TB]

I have (IIRC) five separate mortgages - original house mortgage, additional borrowing, moved, additional borrowing, moved more additional borrowing then additional borrowing for recent works on the house.

They all have separate fixed periods and will / do get the best deal on each as they come to the end of the term. I've thought about consolidating them but the ERC put me off / didn't make sense to. Inna few years when all the periods are near aligning I'll look at it again.

I don't see it as an issue at the moment

 

[Jimbo Mahoney]

I have (IIRC) five separate mortgages

Thanks - same lender or different lenders?

 

[{SAS}TB]

Thanks - same lender or different lenders?

No probs. Same lender - Barclays

 

[chroniclard]

Its all doable, even though may have you have multiple loans with different dates they providers are used to dealing with it. We have chopped and changed multiple times and at one point had several loans.

 

[happy_2008]

Thanks - same lender or different lenders?

You are only allowed one charge per house meaning you would only ever be with one lender.

 

[Semple]

Presumably if you needed to change lender and consolidate the loan, you would have to borrow an amount to pay off all 'mortgages' which would leave a new single loan that had the balance of all remaining mortgages.

 

[Jimbo Mahoney]

Sounds awesome, thanks guys!

 

[Slade2]

We did this on our house but only borrowed the 2nd amount for a much shorter period, kind of like a loan but with a fairly decent rate. The plan is to pay off this additional borrowing and then overpay that amount each month on the main mortgage since we are already used to pay both the mortgage amount and the additional borrowing `loan` I think when we initially looked at it, it was silly amounts of interest to borrow the additional money over the 22 years or so we had left rather than just borrow it for a much shorter period of time. I think it worked out the difference in payments was less than £50 or something silly, compound interest is a bitch!

 

[b0rn2sk8]

This is really simple.

You can’t have your two mortgages split over two providers. All the mortgages in that property must be with the same provider.

You are effectively locking yourself to that provider for the next 5 years, to get out of it you’ll have to pay the ERC.

In two years your current provider may not be competitive and you may want to move. If you do want to move you will have to move both loans and pay the early redemption charge on the 3 years of additional borrowing. That said, it may not be much depending on how much you actually borrow, it’s normally a % of the outstanding balance.

Is there any reason why you don’t just fix for 2 years on the additional borrowing and then re-mortgage the whole lot in 2 years?

The risk of not fixing for a long period for additional borrowing when rates are so low probably isn’t that high assuming it’s a relatively small amount compared to the main mortgage.

 

[BUDFORCE]

You are only allowed one charge per house meaning you would only ever be with one lender.

You can’t have your two mortgages split over two providers. All the mortgages in that property must be with the same provider.

Some lenders will allow existing/second charges. Really depends on the total level of borrowing against the value of the property, or loan to value, and a lenders criteria.

I've done them before.

 

[Jimbo Mahoney]

Thanks all.

Joint account looking healthy now!

 

[BUDFORCE]

Thanks all.

Joint account looking healthy now!

Depending on your perspective.

Your account balance is full of money, that isn't yours.....

 

[Jimbo Mahoney]

Depending on your perspective.

Your account balance is full of money, that isn't yours.....

Increased liquidity and increased leverage - what could possibly go wrong!?

I'm putting it all on red. Guaranteed to double my money!

Paying down a mortgage when interest is 1.66% is for losers.

(But seriously, I know what I'm doing, honest!).

 

[Buffman]

I have (IIRC) five separate mortgages - original house mortgage, additional borrowing, moved, additional borrowing, moved more additional borrowing then additional borrowing for recent works on the house.

They all have separate fixed periods and will / do get the best deal on each as they come to the end of the term. I've thought about consolidating them but the ERC put me off / didn't make sense to. Inna few years when all the periods are near aligning I'll look at it again.

I don't see it as an issue at the moment

Surely the main downside is that you're tied to what your current lender can offer you at the time of each revised mortgage update/ fixed period ending? If you have a big high Street lender might not be so bad

 

[Haggisman]

Some lenders will allow existing/second charges. Really depends on the total level of borrowing against the value of the property, or loan to value, and a lenders criteria.

I've done them before.

This. If you have enough equity in the property that in the case of a default there would be enough left over when each lender has taken their chunk then it's perfectly possible

 

[lucky13]

We recently moved and took out the second mortgage using a product that has no ERC that way when my first fix ends I can consolidate it all into a single product or keep the two separate. We are with Nationwide.