Client Trading up to a Bigger Property Requiring Competitive Five-Year Fix

The client: Our client wanted to move to a bigger property. He had a two-year fixed-rate mortgage on his existing home; he wanted to port this to avoid paying early repayment charges (ERCs) and increase the borrowing in order to purchase a £992,000 property.

The ERCs amounted to £7,800 so the client was keen to avoid paying these if possible. His existing mortgage was £370,000 so he needed to increase this to £694,400 in order to buy the new property.

We explored the option of porting the existing mortgage and doing a top-up of £324,400, compared with alternative options on the market. To make matters more complex, the client decided he wanted to extend the fix to five years so we investigated whether the ERC could be waived in this scenario if he stayed with his existing lender. However, the lender advised that this was not possible so we explored the whole of the market to find an alternative lender with a more cost-effective option.

Numerous lenders were sourced but we needed one with extremely competitive rates, making the switch cost-effective even if the ERCs were paid in full.

Key requirements: –

• A lender who would lend the full £694,400 required to purchase the new property. • A lender offering such competitive five-year fixed rates that it would be cost-effective for the borrower to pay the ERCs to switch. • A lender who would agree to add the arrangement fee to the mortgage.

After sourcing the mortgage market, we identified a lender who was offering 1.22 per cent fixed for five years. This would replace the borrower’s existing rate of 2.04 per cent for two years, saving him £2,500 over the initial term, even after paying the ERCs.

The application process: To support the mortgage application, the client provided details of his income, along with evidence of his identity. We were delighted to inform him that a lender had issued a formal mortgage offer for the full amount requested at a very competitive rate.

• Residential property value: £992,000

• Loan amount: £694,400

• LTV: 70%

• Rate: 1.22% fixed for five years

• Lender product fee: £1,499 added to the loan

• Monthly payment: £2,522
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