If you want to Remortgage but don’t want to lose your current rate this article should be helpful you.
Here’s what it covers:
- Who want to raise money but keep their existing mortgage
- Existing mortgage is on a good rate
- Existing mortgage is ‘interest only’
- Income does not allow them to borrow more on a mortgage
- Circumstances or credit rating have changed since the original mortgage
There are currently hundreds of thousands of existing mortgage holders that mortgages are on:
- Low tracker rate margins
- Fixed rates
- Products with early repayment penalties
- Interest only
In these cases it would be fool hardy to disturb them. However, but by leaving the existing mortgage in place you are restricting your options if you want to borrow extra money.
In such a scenario you would need to work out whether it is better to refinance the whole amount (including the existing mortgage) or look to take a second mortgage (secured loan) on the additional balance. It is a mathematical equation and if you do not feel comfortable attempting this yourself, I would recommend you enlist the expertise of a mortgage broker, such as Niche Advice Limited, to help you.
Secured loans are much more reputable that they used to be and ‘residential’ ones (i.e. secured on your main residency) are under the protection of the new regulator The Financial Conduct Authority. This is excellent news for the consumer.
Furthermore the exit charges (early repayment charges) are limited to 1 month’s notice on some products – so you can pay the loan down or off without being unduly penalised. This is a vast improvement on yesteryear when the costs where very high and often applied for several years.
Top three ways a secured loan could help you?
1) Well most remortgage lenders will insist on your whole mortgage being on ‘repayment’. This is likely to add to your monthly payments and conflict with the repayment strategy you had in mind. The secured loan is separate from the first charge mortgage so would have no such obligation.
2) Secured loans also work out affordability in a more flexible way in terms of income multiples. They will also allow for recently self-employed applicants and applicants with adverse credit.
3) The secured loan will be beneficial if the overall blended rate is lower than what you could achieve by remortgaging the full amount. It terms of ratio if your first charge existing mortgage is the higher percentage of the overall borrowing it is likely to worth considering.
For example Secured loan versus conventional Remortgage:
In this fairly typical example the saving is £231 a month (£685 – £454).
| Existing Mortgage | Secured loan | Remortgage | |
| Rate | 1.5% Tracker for life | 7% variable | 3.5% fixed |
| Balance | £200,000 | £35,000 | £235,000 |
| Monthly cost | £250 | £204 | £685 |
| Combined | £454 | £685 | |
This a fairly crude sum as set up costs need to be taken into account but these are fairly similar for both a secured loan and a remortgage. For an individual quote for your own circumstances please contact us.
If you want to remortgage but want to keep your existing mortgage rate, please call us on T: 020 7993 2044 so we can talk about your options. Alternatively please complete the online enquiry form on this page.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London and is an experts in getting a mortgage for doctors in the UK.
