Remortgage of Additional Borrowing

Posted on 23 October 2017 by Brendan

I have a very good deal on my main mortgage with Nationwide but only a reasonable deal with them on the smaller additional borrowing that was required when I moved house. When the tracker deal on my additional borrowing expires would it be worth looking at moving this part of the mortgage to another provider?

Hi Brendan,

I would be very surprised if it would be worth your while moving the additional borrowing to another Lender.

Any new Lender would be looking at a mortgage that would rank behind your existing residential mortgage with Nationwide. What this means is that in the event of your home being repossessed, Nationwide would have first bite of the cherry and any other Lender(s) may have insufficient funds left to repay their loans. It is because of this higher risk to the Lender that interest rates on 2nd mortgages tend to be higher.

Depending on when you arranged the additional loan, it will revert to either 2.50% or 3.99% when the current rate expires. The lower rate applies to any borrowing taken before 29th April 2009 and is tied to the Bank of England Base rate + 2.00%. I think that it is unlikely that you would be able to better these rates with a new Lender without remortgaging the whole of your borrowing with Nationwide and from what you have said, it sounds as if it would be difficult to beat your existing deal.

One word of warning. If you choose to switch the additional borrowing to a new Nationwide mortgage product, the new product will revert to their Standard Mortgage Rate (SMR), currently 3.99%. Unlike the Base Mortgage Rate (Bank Rate + 2.00%, the SMR has no upper limit or cap and it is not possible to switch back to the Base Mortgage Rate at a later date.

I recommend that you discuss your circumstances with both Nationwide and an independent mortgage adviser before making any decision about your mortgage.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.


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