Why is a remortgage more expensive - should I swap lenders?

[Eagerbeaver]

In round figures, we've have a mortgage of £60k which is being paid back at the lenders SVR. I'm looking to borrow an additional £130k against my property to fund a business. My provider has said, no problem but the interest on the £130k is about 3% above what I'm paying on the £60k.

Looking in the market, I can see deals more attractive than even my current lenders.

Assuming the new lender accepts me, is there any reason a lender wouldn't release the additional funds at their rate even though my mortgage currently is only £60k?

[Lawrence5]

What's the property worth ? Lenders profile on ltv loan to value. You trip thresholds and the deal gets worse...

Also they often use an index to calc from the last time it was valued - not a great indicator when I did it.

New mortgage will mean new fees and valuations etc. I favoured sticking with lenders who offered repeat deals without repeat fees... Was with nationwide for 18yrs

[Sarnie]

Eagerbeaver said:

In round figures, we've have a mortgage of £60k which is being paid back at the lenders SVR. I'm looking to borrow an additional £130k against my property to fund a business. My provider has said, no problem but the interest on the £130k is about 3% above what I'm paying on the £60k.

Looking in the market, I can see deals more attractive than even my current lenders.

Assuming the new lender accepts me, is there any reason a lender wouldn't release the additional funds at their rate even though my mortgage currently is only £60k?

The key is your overall Loan-To-Value. Borrowing the extra £130k will push the LTV higher which represents an increased risk to the lender, reflected in the rates offered.

If you need any help, advice or figures drop me a PM, always happy to help

[Eagerbeaver]

Many thanks. The point about LTV makes sense.

[skeeterm5]

Also, it may be because you want it to fund a business rather than buy a property. If I were the lender I might think that I am lending you more and that if the business fails what is your source of repayment?

I would effectively be 'pawn broking' using your property for security. You might be better seeking a properly structure business loan secured against your property. The rate would then be more negotiable against the viability of the business plan.

S

[aka_kerrly]

skeeterm5 said:

Also, it may be because you want it to fund a business rather than buy a property.

S

There are lenders out there who refuse additional borrowing to fund a business.

As someone else pointed out another issue with new mortgages is that the application fees are in my opinion overly expensive. These can be added onto the loan amount but you end up paying interest on the fee amount over the duration of the loan period, this can add thousands when some application fees are 1.5% of the loan amount.

That said beyond the application fees, a lot of lenders offer remortgage packages with free valuations, no legal fees and
even cash back toward your solicitor fees plus some of the fixed rates available are still cheaper than most lenders SVRs.

[Sarnie]

skeeterm5 said:

Also, it may be because you want it to fund a business rather than buy a property. If I were the lender I might think that I am lending you more and that if the business fails what is your source of repayment?

I would effectively be 'pawn broking' using your property for security. You might be better seeking a properly structure business loan secured against your property. The rate would then be more negotiable against the viability of the business plan.

S

None of this post is true I'm afraid.

The lender won't have different rates available for different uses of the funds. They will either lend you the money or not.

[fido]

Well in theory if you spent the money on extending / improving your home, it should improve the valuation if you were to remortgage again.

[jdearden]

Sarnie said:

None of this post is true I'm afraid.

The lender won't have different rates available for different uses of the funds. They will either lend you the money or not.

Very true. If they are willing to lend you the money they will.
I've found a lot of lenders won't lend money if its for business purposes.
But if they are offering u a fixed rate of course it's going to be more than svr.

[skeeterm5]

Sarnie said:

None of this post is true I'm afraid.

The lender won't have different rates available for different uses of the funds. They will either lend you the money or not.

I beg to differ - the underlying purpose of the loan (or further advance) does drive the rate.

Some lenders specifically exclude further advances on home mortgages for business purposes (eg Nationwide), and a direct quote from Business Money says with respect to further advances to fund bsuinesses "Some lenders charge a premium on the standard mortgage rate but many do not and lenders are proving very flexible in order to hang on to business."

So, in your binary dismissal of my answer please quote your evidence.........

S

[Sarnie]

skeeterm5 said:

I beg to differ - the underlying purpose of the loan (or further advance) does drive the rate.

Some lenders specifically exclude further advances on home mortgages for business purposes (eg Nationwide), and a direct quote from Business Money says with respect to further advances to fund bsuinesses "Some lenders charge a premium on the standard mortgage rate but many do not and lenders are proving very flexible in order to hang on to business."

So, in your binary dismissal of my answer please quote your evidence.........

S

My evidence is 11 years of trading as a Mortgage Broker

As I said, the lender will either do it or not, they won't apply different rates for diferent uses of the funds.