Loan options

By THIS IS MONEY
Updated:

 

MY two endowments mature in 2012 for £45,000 when I will be 57. My mortgage is £45,000 and the house is worth £120,000. I want to buy another property for £150,000 - what are the options for borrowing over £45,000? I presume I'd need two loans - one interest-free for £45,000 and one repayment loan for £30,000? Could I take the repayment loan for a longer term than the endowment loan, say to 2015 or 2020 when I'll be 65 if the repayments looked prohibitive over a ten-year term? My wife is not working but hopes to be within a year or two. DM, Guisborough, Cleveland.

David Hollingworth of brokers mortgage brokers London & Country, says: Whilst this is like having two separate loans you'd have to take the whole amount from one lender because mortgages cannot be split between two lenders.

Many lenders let you split both your repayment method and the terms on each element, but not all will do this so you'd have to check with each one.

First of all, check if there are any penalties on your current deal, then if not (or it still works out better to pay it and swap anyway) look for the best deal in the market.

If it turns out not to be worth swapping, you should be able to transfer the existing loan tot he new property and topping it up with another product from your existing lender. As an alternative to splitting the terms you could take the whole mortgage over 15 years and ensure you have a penalty-free product when the endowments mature.

That way you pay the interest only portion penalty-free, leaving just the remainder of the repayment element. Finally check the endowments are on track to pay of the full £45,000. If not, add any shortfall to the repayment element to reduce reliance on the endowments.

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