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Aug, 2014

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  1. #1
    Join Date
    Aug 2012
    Location
    London
    Posts
    204

    Default increasing the mortgage on my BTL property in order to provide a deposit for another

    Hello everyone,

    I currently have a BTL property with an £88k mortgage on it. The property is worth £250k. I am a few months into a two-year fixed rate 4% mortgage with Birmingham Midshires.

    I would like to increase my mortgage on this property in order to provide a deposit for another BTL property. The mortgage deal I am on allows up to 60% LTV, so I had vaguely assumed that I could simply apply for a further draw down up to the full 60% at the same rate (which would give me up to a further £62k).

    My mortgage broker has informed me, however, that if I want to take a further draw down on this mortgage, I would have to pay 6.19% interest on it. Does anyone know if this is normal? Is another option?

    All the best
    Alex

  2. #2
    Join Date
    Jan 2010
    Location
    West Midlands
    Posts
    414

    Default

    Quite normal - the original tranche of money of which you first loan was a part would have been used up months ago. The best you could hope for is one of the current BM offers but as this is a further advance, their normal SVR is what you usually end up with.
    CFA

  3. #3
    Join Date
    Aug 2012
    Location
    London
    Posts
    204

    Default

    Thank you for the reply -- very helpful. This makes sense, although Birmingham Midshire's SVR is currently 4.84% (which would be fine) so the 6.19% interest rate that I have been quoted is well above that. I suppose that they are well within their rights to quote whatever interest rates they like on a "take it or leave it" basis. Are there any other options?

  4. #4
    Join Date
    Aug 2012
    Location
    London
    Posts
    204

    Default

    Just wondering, does anyone have any further thoughts on this?

    The only other option I could think of would be to borrow with the lender placing a second-ranking charge on my property -- although I don't imagine that lenders would often be willing to do that at an interest rate which was any better than the 6.19% offered by my current lender.

    Has anyone else been in a similar situation?

  5. #5
    Join Date
    Jan 2010
    Location
    West Midlands
    Posts
    414

    Default

    I doubt a 2nd charge lender are going to be any cheaper than the amount your existing lender will be charging and you will have both additional valuation and legal fees. The other factor that a lot of people considering 2nd charges need to take on board, is whether the 1st charge holder will allow a charge behind them in the first place, many don't.
    CFA

  6. #6
    Join Date
    Aug 2012
    Location
    London
    Posts
    204

    Default

    Thank you again for your advice.

    I am surprised that this situation doesn't crop up more often. The interest rate which Birmingham Midshires has offered me seems extortionate for what is effectively 60% LTV in the current interest rate climate; out of interest, what sort of interest rate are other people being offered for further borrowing at the moment? (I realise it won't affect me, I am just curious as to whether such high rates are commonplace for further borrowing).

  7. #7
    Join Date
    Jan 2011
    Posts
    1,429

    Default

    Have you got an early repayment charge if you exit the mortgage and start again? It might not be that high, check it out? It might be OK to completely re-mortgage with a different lender for the full amount.

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