Need Help

joanne1971

Hello

I need some help - with what to do about our mortgage situation.

We have a house worth about 130,000 - 140,000 which we have a mortgage of 62,000 on the house.

We are on a fixed rate deal that ends in March so we want to remortgage. But also we want to do some home improvements that will cost about £50,000. So we want to increase our mortgage to £112000.

We have a monthly income of £3000 but need to pay about £400 out on child care.

We are 38 and 46 respectively so obviously do not want to increase the duration of our mortgage which we have 10 years left on. He is the main wage earner

However, my husband is due to retire in 10 years with a lump sum of about 140000.

We are thinking of taking out an interest only mortgage or maybe a part and part mortgage.

Can anyone give me any advice.
jo

waveneygnome

Hi Jo,

I'm no mortgage expert - but there a few things I can contribute, as I have done what you are proposing in the past.

1) If you owe £62k and add £50k = total borrowing £112k on a (at worst case) £130k house, that gives you a LTV of 86%. This will prevent you from getting the most competitive interest rates. I know that once the work is completed, then the house value should increase - decreasing your LTV, but when you apply for the funds....your house will only be worth what it is in its current state.

2) £50K of house renovations is a lot to spend on a £130k house. Are you sure that you will recoup the money spent. It is possible to 'overdevelop' or over spec a house. We have friends who have extended their 3 bed semi at the back, sides and attic. They now have a 6 bed house in a row of 3 bed semis. It looks totally overdeveloped/out of character with the rest of the houses in their street. They are trying to sell it to......downsize.

3) My uncle is a property developer in America. He has always told me to buy the worst house on the best street, and develope it. Not the other way round. It sounds like you are planning to stay in the house for a while.......but at some point the house will be sold. Have you looked at/considered moving house. What can your money buy for £180k?

Having said all that.................about 4yrs ago we did exactly as you plan. We could not borrow the extra £40K on the mortgage in our case. We applied for and got 6 credit cards (0% at the time), bought all the materials on credit cards, and took out a personal loan which we used to pay the builders. Once all the work was completed, we were then able to remortgage (the improvements had pushed up the house value) and with the remortgaged funds, repay all the credit cards & persoanl loan.

Hope this helps. Good luck with your decision.