Remortgaging with Homebuy

rodd-y-ler · 16 November 2011 at 11:42AM

I'm struggling to get my head around this, so any help would be greatly appreciated.

Original flat price: £153,000
Homebuy equity loan: £45,900
Deposit: £7,100
Mortgage: £100,000 fixed for 2 years at 4.8%

At the end of the fixed period, my equity will be deposit (£7,100) + capital repayments totaling £4,320, so £11,420, or 7.5% of the original property value.

I will still have 3 more years of no interest on the equity loan, and plan to sell up before I have to start paying (1% for the 6th year, or £40 extra a month).

I'm looking to remortgage, but can't seem to find any information on how it works when you have an equity loan. Would they view my LTV as an effective 62.5%?

From what I gather, and a small number of lenders will work with a Homebuy scheme, so I'm not expecting amazing rates, but I wanted to capitalize on the low base rate that is currently happening.

Also, what happens if my property increases in value? It's likely to be work around £166,000 now, will my remortgage need to happen based on it's increased value? Or does that only happen if I switch lenders?

Thanks!

brit1234 · 16 November 2011 at 2:01PM

What have you done to increase the value £13K, refit, extension?

Homebuy was axed as it was a failed project, its been replaced by Firstbuy (equally dodgy), may be a firstbuy mortgage provider would be able to help you out.

rodd-y-ler · 16 November 2011 at 2:10PM

Not done anything to it, values have just gone up in the area over the past 2 years. It was phase 1 of a new build development, and brand new 1-beds in the same development are going for £175k now.

kingstreet · 16 November 2011 at 2:24PM

You're unlikely to be able to remortgage. You currently have a first charge (mortgage) and a second charge (equity loan) on your property.

When you come to remortgage, the first charge is repaid, effectively promoting the second charge to a first charge. Your new mortgage lender will not accept this so your remortgage will stall.

They will then ask you to obtain a deed of postponement from the second charge holder which allows the new lender to have a first charge and the equity loan to remain a second.

In my experience, it is very difficult to get a deed of postponement in these circumstances.

All I can suggest is you go back to your existing lender and ask them what "customer retention" products they have for you to transfer onto when your current deal ends. That's assuming you aren't happy with the follow-on rate for your current deal, of course.

rodd-y-ler · 16 November 2011 at 3:10PM

Really? Well that makes Homebuy/Firstbuy/whetever scheme much less use than I had first though.

So I am essentially stuck with my current lender until I sell up or buy out the equity loan?

kingstreet · 16 November 2011 at 3:17PM

rodd-y-ler wrote: »

Really? Well that makes Homebuy/Firstbuy/whetever scheme much less use than I had first though.

So I am essentially stuck with my current lender until I sell up or buy out the equity loan?

Have you asked for a deed of postponement? I'm generalising that it will be difficult, but I don't know who holds your second charge, so I'd suggest contacting them.

By the way, your calculation of LTV should look like this;-

£166k value
£142k (ish) mortgage and loan

142 / 166 = 85.5%

HTH

rodd-y-ler · 16 November 2011 at 3:47PM

So because the flat has increased in value, I have lost equity in it??

When I completed, the equity loan was 25% my deposit was 5%, and the mortgage was 70%. My payments over the past 2 years and based on the original purchase price has decreased the mortgage share by 3% and increased my equity by 3%.

Is it only if I remortgage that it is all recalculated based on the new value?

rodd-y-ler · 16 November 2011 at 3:48PM

Oh, and renewal time won't be until May next year, so no postponement has been requested yet.

kingstreet · 16 November 2011 at 4:18PM

You only apply for a deed of postponement when you intend to apply for a remortgage. It's worth asking now if such a request would be granted so you know if you are limited to staying with your existing lender or can move elsewhere should you choose.

The loan to value is the total of any credit secured on the property divided by the current value. Based on £142k credit and £166k value, that's 85.5%.

When you bought the property, you bought for £153k and had credit of just under £146k, so that's a loan to value of 95%.

Your figures in your last post are wrong;-

£153k purchase price
£45.9k equity loan (30%)
£7.1k deposit (4.6%)
£100k mortgage (65.4%)

and I'd have a stab at your mortgage being with Woolwich (?) as the other lenders in the SE market would have wanted a gross 5% deposit from you, or £7,650.

rodd-y-ler · 16 November 2011 at 4:33PM

I may have messed up my calculations a bit.

Deposit was 5%, so it would have been £7,650.

So if your property increases in value at a higher percentage than your mortgage interest rate, you are better off not remortgaging?

kingstreet · 16 November 2011 at 4:42PM

rodd-y-ler wrote: »

So if your property increases in value at a higher percentage than your mortgage interest rate, you are better off not remortgaging?

I don't understand what you mean by that. I can't see any connection between the two which has any great relevance.

You started off with 95% of your property mortgaged and based on the value you've given, that's fallen to just over 85%.

At 95% you'd have no chance of a remortgage, at 85% (you'll need to get down to 85% exactly!) you'll have better remortgage options.

If you look for a new deal with your existing lender they may not wish to take the increased value into account and this may result in a better deal from a remortgage if you can get the deed of postponement and the lender's surveyor to agree the value is £166k or more.

Remortgaging with Homebuy

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