Remortgaging for a small amount?

[ranchababs]

Hi all,

My 5yr fixed mortgage is up next June. My MIL has gifted us a substantial amount of money (to be used specifically to pay most of our mortgage off) but it will leave us with a small amount left to pay (around £17k).

I am trying my best to save, but my partner is out of employment at the moment and I am supporting us both.

My question is, will I be able to remortgage for an amount as small as £17k? I'm awaiting an appointment from Halifax to discuss but wondered if anyone had any experience of this?

(I've already made my bed with remortgaging at double-triple interest rate!).

TIA x

EA just told us that it has to be a minimum of 30k and anything smaller has to be a loan.
We haven’t yet spoken to a mortgage provider to confirm this but I’d assume he’d know what he’s talking about.

@TheFinerThings I suspected that would be the case! Thanks for sharing so quickly 😀

Could you pay off all bar the minimum amount you need to be able to re-mortgage, then pay another chunk off once the remortgage has been finalised?

We're expecting a similar amount left when our fixed term ends but we are planning to overpay every month until it's gone as there will not be any overpayment limits.

@CyberCritical Hmmm I'm not sure how that would work...I had planned to take advantage of the mortgage term ending in June to then pay off the huge chunk and avoid any early repayment charges. Which then leaves me in the predicament of having a low (ish) amount to pay off.

@Goldmember overpaying on the remainder? My concern is I won't be able to get a mortgage for the remainder with it being such a small amount for a mortgage 😞

Pay off as much as you can to leave you with a 30k balance. Hold back the rest. Fix for two years and pay the remainder off then.

Agree with others, don’t pay off that last 13k so your total left will be 30K, then get a mortgage where you are allowed to make overpayments. You can then immediately off the 13k chunk if you want to.

You keep your mortgage as is. The rate will likely shoot up to SVR but you can overpay as much as you'd like. We hope to have it cleared within 6 months.

Also consider getting an offset mortgage for £30k then sticking the remaining £13k your MIL has gifted in the offset account, which means you'd only pay interest on the £17k balance.

Either hold back enough to get a £30k mortgage or if you can afford to pay the £17k fairly quickly go on to the standard variable rate and blitz it. Unlikely, but check if an ordinary loan will be any cheaper than the cost of remortgaging.

Check whether you can borrow 17K as a personal loan (say it's for house repairs or a car or something). Might be a better option.

Remortgaging on a small amount (e.g. £30k) is costly as you may have an admin fee of £1500. That’s 5% of the loan amount before even paying interest. As such, it’s either better to go on to the SVR or take out a loan and pay it off within the term of the loan.

It makes sense for us to not remortgage due to unlimited overpayments, no ERC and not having to pay new product fees of up to £2k. We may have to pay more interest but it's in the short term.

Could you get a personal loan for the £17k which is left?

Have a discussion with a mortgage broker. You have a few options:

1. Keep enough back to get a new mortgage rate, stick the extra in the highest interest savings account you can find, overpay new mortgage as much as can and pay off at the end of that term.
2. Keep current mortgage and go onto SVR, which will be high but overpay as much as possible.
3. Hold enough back to get a tracker mortgage. Lower than SVR for the initial term and unlike fixed mortgages they often don't have a limit on overpayments. So you'd be able to pay off the extra £13K and pay off the mortgage over the new term at lower than SVR rate.

Are you married? You said MIL but then partner. How is the interest in the house split? Joint tenants/tenants in common?
Has your partner’s mum signed anything to say it’s a gift to both of you? Just thinking down the line if you aren’t married and your partner tries to claim more due to the gifted amount if there is a relationship breakdown.

Halifax told me that the minimum I could borrow was £25k. I did this, on a mortgage with no fees as it made more financial sense.

We have taken the £25k mortgage overpaid then overpaid the max without penalty, so

• this calendar year we'll overpay £2.5k
• in Jan we'll overpay 10% of the balance (~£2k)
• the following Jan we'll probably pay off the balance

If you remortgage, look at what the payments would actually be, compared to what your payments on the current mortgage once the fix ends, but only on £17K. The difference in rate on a new mortgage of 30K would have to be much lower to be able to save money paying interest on £30K (possibly plus fees etc taking you closer to double the balance) than £17K.

If you kept your existing mortgage on the SVR, after your fix ends, could you continue paying what you are paying now, when you have paid off all but 17K? Or are you struggling to make the payments off one wage? Because when the balance is reduced to £17K, if you can keep payments at the level they are now, that's presumably a big overpayment itself and should reduce that 17K much faster.