Remortgage as soon as i buy a new build?

bjj0002

Hello,

This is my situation, i got a very very good deal on a new build.

i paid £175k for a house that will easily be valued at £220-225k.

Due to the circumstances there was only one bank we could get a mortgage with at 85% (10% was a 0% loan from the builder - therefore not many banks will accept this as a deposit).

Now my question is, now everything is signed and the house is mine, (obviously i have a 17.5k 0% loan to pay back in 10 years) can i remortgage and use the equity as a deposit (I currently have 149k mortgaged on a house worth 220-225k).

So basically remortgage at 225k, on a 75% mortgage, get a far better interest rate, and the money i would add to the remortgage would be say the 3k fees, but in the 2 years fixed rate i would end up paying more back because of the interest rate (for example, if i recall correctly in first 2 years i only pay back 1.8k, but with a lower mortgage interest rate i pay back 7.5k) so be in a far better of position at the end of the two years.

What are you thoughts on my thoughts?

Cheers

_Andy_

Why do you think a new build, in today's market, would be worth so much?
I think you're being far, far too optimistic about it's value.

StuTheDon

bjj0002 wrote: »

Due to the circumstances there was only one bank we could get a mortgage with at 85% (10% was a 0% loan from the builder - therefore not many banks will accept this as a deposit).

Ok - one of the circumstances is that most banks require 75% LTV on new builds becasue the value of them is dropping so fast. I also think you are being extremely optimistic.

What are you basing the £220k value on? What the builder told you, or what similar houses have sold for? Remember something is only worth what someone is willing to pay for it.

You sound like you are stretching yourself to be honest - what are you going to do when interest rates go up - which they will?

If you are going to proceed with this, try and get yourself on a fixed rate deal and try to overpay the mortgage each month to avoid inevitable negative equity.

Jacka87

When you remortgage you have to inform the bank of debts that you have as well as them carrying out a credit check etc.

I think that they will take into account that the builder will have a 10% stake in your property and therefore I believe they will only lend based on your percentage. I could be wrong on this however it is just how I have always thought they worked.

The other issue is that of the value. I believe you need an acurate evaluation before you take this any further at the moment, I am currently trying to remortgage and I know what my property is worth due to similar property sales, what I paid being a very good deal etc just like your circumstances as my flat was bought as a repossesion and then sold to me. The bank always take the lower value when looking at mortgages, so the lower value from the valuation and the price paid is what they mortage you for.

Rick62

I doubt you would get a much better rate anyway and most lenders now won't look at remortgage within 6 months. Who is your lender currently and what rate?

Trollfever

I think you will find that the developer will/has taken a second charge on the property to secure their loan.

bjj0002

There are similar house in the area up for that figure... It is a 4/5 bedroom 3 storey detached house with driveway and garage.

Thankyou for advice i will seek a professional evaluation.

Do people here believe its better to get a fixed rate for more than 2 years?, or in 2 years beleive interest rates will still be down?

rick: lender is nationwide and rate is 5.3 (if i recall correctly - will check. but on a 75% its 3.49)

cheers again

_Andy_

Does the builder/developer have a second charge on the property?
This is important as it will have implications if you want to change lender (assuming the valuation holds up obviously)

beecher

There's a very big difference between being up for sale at a certain price, and being worth it. I can't see you having the equity you think you do.

bjj0002

i will ask the builder... so a second charge is security if the 10% stake isnt paid back?

bjj0002

beecher wrote: »

There's a very big difference between being up for sale at a certain price, and being worth it. I can't see you having the equity you think you do.

so i understand.... i have an estate agent round and they say it should be on market for "A" amount, i then ring mortgage people, pay survey fees, they come back with "B" amount... how do we get to the agreed amount "C"... or is what the survey says sticks, they agree or disagree with your valuation?