Decreasing Property Value/LTV Ratio

pennypincher1010

Hi There!

Last summer I borrowed approximately 85k to purchase a flat at £128k - within a month or two of buying the place, the property market went 'pear-shaped.'

My fixed mortgage (4.99%) comes to an end in the summer of 2009, and I am becoming increasingly anxious with regards to re-mortgaging and the general financial situation.

I am reading dire predictions of drops in property prices, and was wondering as the value of my property drops, will my ability to re-mortgage/find a decent new mortgage deal become increasingly difficult?

With my property valued at 128k last summer, how much would its value have to drop before my current lender wouldn't want to re-mortgage me?

On a positive note, property prices in my area have always been below average, so I don't expect a massive drop.

Thanks in advance for any advice....

:money::money::money:

bscousegit

I'd calculate that it would have to drop to @ £95,000 for the mortgage company to get twitchy - that would be around 10% equity for the remortgage.
You can always apply for a mortgage 6 months before the deal runs out in summer 2009, if you get accepted keep an eye on mortgages as new products undoubtedly will come out over the 6 month period. If the newer products are better then go for them.

maninthestreet

Make over-payments on the mortgage to bring the oustanding amount down.

koexelek

As long as you retain at least 10% equity in the property, you should be OK to get another mortgage.

The way it is tending to go these days, is that the more equity you have in the house, the better the rate the lender will give you.
Someone who wants to borrow 50% is going to get a better rate than someone who wants to borrow 80%

pennypincher1010

Hi There

Many thanks for your suggestions. I think overpayments make sense, but I am keeping my cash reserves as a buffer against possible unemployment. Maybe I should get a 2nd job, and use that to make overpayments. I have just found out from A+L, that I can reserve a new rate from Feb 09 onwards. Hopefully the drop in houseprices by that time won't be too dramatic.

Cheers
:beer::beer:
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