Is this re-finance deal a good move or am I missing something

Discussion in 'Property Finance' started by Paterson00, 23rd Jun, 2015.

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  1. Paterson00

    Paterson00 Well-Known Member

    19th Jun, 2015
    Perth WA
    Hi all

    I am looking into re-mortgaging my UK property to release some equity to buy an investment property here in Oz and am not sure if the offers are as good as I think they are. I am not overly experienced.

    So I have got in touch with a couple of UK expat brokers. One has said that with the rent I have coming in on the property vs the monthly payment of the loan, I will not be able to get lending. I am about $400 per month under what I could achieve at the top end of the market rents locally so should easily be able to raise that by $300 although, as my brother is my tenant ( I am aware of the can of worms this could lead to and issues it could be causing me in lost revenue etc ) I will not be raising the rent just yet.

    The second broker said that the capital raising through equity release will not be an issue at all so I will explain what was offered to me vs my current deal and you can tell me if it is as good as it sounds or if I am missing a trick.

    My current mortgage is an interest only on 120,000 pounds at 4.78% APR giving me a monthly payment of 478.16 pounds
    The mortgage options I have been offered are all repayment on 127500 taking me to 75% LTV and all over 32 years.

    1.79% fixed to 30/09/2017, lenders fee £1,025 that is added to the mortgage, free valuation & legal’s. Monthly repayment £440

    2.3% fixed to 30/09/2018, lenders fee £1,025 that is added to the mortgage, free valuation & legal’s. Monthly repayment £474

    2.78% fixed to 30/09/2020, lenders fee £1,025 that is added to the mortgage, free valuation & legal’s. Monthly repayment £506

    Broker fee is 1% of the loan amount (minimum £750) payable £250 on application, only once we have a positive decision in principle, & the balance on offer.

    I would most likely to take option number two. My calculations say that the initial extra borrowing of 7500 pounds will have the been repayed in 32 payments and by the end of the of the 3 year fixed term I will owe less than I currently owe and the monthly payment will be less per month. I know that I will be liable for more tax as the interest on the mortgage payments will be less but this still seems like a good move.

    Is there anything glaringly obvious that this amateur is missing or is this as good as it seems?

    One question I have not looked at yet is what the rate reverts to after the end of the fixed term as I assume that I will re mortgage at that time onto another good deal. I have also not yet confirmed if there is a charge to release me from my current mortgage but from memory there is not.