Can I get a further advance at the same fixed rate?

Posted on 28 August 2007

Hi Katie,

I have just remortgaged my current property (which I do every 2 years). I have gone with a fixed rate repayment mortgage with the Nationwide. I initially signed up in February so got quite a good fixed rate deal. I had to wait until the beginning of July though for the mortgage to go through until my previous tie-in period had ended with my previous lender. However in the meantime we discovered that we were expecting and now feel we need a bigger property. In order to buy the property I am looking at I will need to increase my mortgage by about £20,000. Will I be able to change my mortgage to the new property with this increase under the same mortgage deal?

Best regards

Mark

 

Hi Mark

Switching the mortgage to a new property is known as 'porting' and most mortgages now have this facility.  To find out if yours does, look at section 10 of the Key Facts Illustration (quote) that you got with your mortgage, and it will explain your choices.

One danger with porting that is often overlooked, is that it is subject to terms and conditions: you have to be re-underwritten by the lender, meaning that you have to still fit their affordability criteria etc: basically they look at it like a new mortgage application.

However, as your mortgage was only arranged in February, I presume that life has not changed too much for you so you should be fine.

As for the additional £20,000, this is called a Further Advance.  Nationwide will lend this to you as long as your income can cover a bit more loan, but it will be at whatever new rate they have available now.  Do not take a two year fixed rate on this part that has an end date different to the fixed rate you are on at the moment.  You will end up in two years' time unable to remortgage the main bit of your mortgage without paying an Early Repayment Charge on the £20,000 because you will be tied in to that little bit of the mortgage.  This could leave you forced to sit on the lender's SVR (Nationwide call it BMR)  for the large part of the loan, (costing you thousands in interest) until your £20,000 tie-in finishes.

What you need to do is take the £20,000 to a product with little or no exit fee so that you can remortgage completely when your two years is up. Unfortunately the only product that Nationwide offers with no tie in (ERC) is their "BMR" product which is currently 7.24%.

You may wish to compare this interest rate with a personal loan.

Katie

Category: Remortgaging, Special circumstances

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