7.18% to 2.65% ????

flammable999

This may be a silly question but am just trying to get my head round the concept..
As already mentioned, house is valued at 250k and i have 95k equity on it and a mortgae of about 160k.
A) If I were to borrow additional funds, for example 10k, then my equity would remain at 95k, my mortgage would rise to 170k and my repayments would increase.
If I were to unlock 10k from my 95k equity, my equity would drop to ____, my mortgage would rise to _______ ? and my repayments would ______ compared to A?
Please could someone fill in the blanks for me! It may seem simple but I just want to get my understanding right.

pwllbwdr

If your house is still worth the 250k, and you have a mortgage of 160k, you now have equity of 90k. If you were to borrow a further 10k on the mortgage, you'd then have a mortgage of 170k and equity of 80k.

If your house is now worth (say) 220k, your equity would now be 60k, which is a LTV of 72%. By borrowing 10k more, you'd have equity of only 50k, which would be an LTV of 77%.

And so on. Don't assume your house value hasn't changed. That will be especially relevant if you want to try to change lenders.

flammable999

pwllbwdr wrote: »

If your house is still worth the 250k, and you have a mortgage of 160k, you now have equity of 90k. If you were to borrow a further 10k on the mortgage, you'd then have a mortgage of 170k and equity of 80k.

If your house is now worth (say) 220k, your equity would now be 60k, which is a LTV of 72%. By borrowing 10k more, you'd have equity of only 50k, which would be an LTV of 77%.

And so on. Don't assume your house value hasn't changed. That will be especially relevant if you want to try to change lenders.

Thanks for the reply. I am not looking to switch lenders for a while yet. I will see how the LIBOR thing pans out for a while but I was just trying to establish if releasing 10k out of the 95k or borrowing an additional 10k on top of existing mortgage pretty much amounted to the same thing. i mean if i released 10k out of the 95k bringing it down to 85k, although that will change the equity percentage, itys still 85k monetaraily, right?

VIGILANT22

being with redstone suggests you have had an adverse credit history...has this cleared now.......

flammable999

VIGILANT22 wrote: »

being with redstone suggests you have had an adverse credit history...has this cleared now.......

Yes and No. When I applied for the mortgage, I had loadsss of late payments but no defaults or CCJs. But then about two weeks before completion, HSBC hit me with two defaults even though I was telling them to hold off because I was very close to wiping everything clean. I satisfied both defaults within a week or two of them appearing on my files but they are still on there and I have just started the ball rolling with FOS to try and get them removed.

This is why moving lenders is going to be tricky which is why I'm hoping LIBOr will remain low for a bit longer even thoguh that means remaining with Redstone. Apart from those defaults, everything else has been spotless since starting my mortgage.

LittleMissAspie

£Value of house - £outstanding mortgage = £equity.
Eg 250-160=90.
So increasing your mortgage always makes your equity drop.

flammable999

LittleMissAspie wrote: »

£Value of house - £outstanding mortgage = £equity.
Eg 250-160=90.
So increasing your mortgage always makes your equity drop.

thats true, i guess no getting away from that fact! Does the fact its your money make them more likely to release it to you than simply borrowing extra from them?

flammable999

Panties1992 wrote: »

What is the point of having an interest only mortage?? :S


I may be missing something, but it just seems foolish and illogical to me to have a mortage instead of rent (so lose all the security of being able to get LHA housing benefit when unemployed ONLY you rent),
but then not actually paying off that mortage, and so never actually owning the property yourself...

I dont plan to stay on interest only mortgage forever but circumstances mean I have to at the mo so I can afford the repayments otherwise I would not be able to. I do plan to stay here and eventually as it was my parents originally and have been here for 20 years already. When I'm in a better financial postion I wil pay capital too, I will prob start overpayin when I go onto the SVR later this year

speedbird1973

Personally I think a year of interest only to cover a Masters degree is good idea.

flammable999

speedbird1973 wrote: »

Personally I think a year of interest only to cover a Masters degree is good idea.

Thanks, thats the way I am trying to look at it. I wont get a better time to do it financially and its something I have to do if I want to change my career path which I desperately want to do. I have been paying interest only for the last two years but thats mainly due to the high fixed rate of 7.18 and my financial situation not being stupendous. Plus a masters is only for a year, well 9 months.