Remortgage advice

xanderd

Hi,

My wife and I are looking to get a mortgage of £150k with up to a £30k deposit which we will be borrowing from my aunt.

My aunt has said that in a few years when we come to sell the property we should be able to remortgage and pay her back the deposit money, as well as having some extra mortgage available to move up the property ladder.

Is this likely? What does remortgaging mean? I will have graduated by then and my salary is likely to be up to double what it is now.

Also are there any other options to us?
thanks

alex

brannyrhino_2

remortgaging is moving your mortgage from one provider to another and at the same time raising additional funds based on the current valuation of the property at the time.

Yes you will be able to do this but it all depends on the housing market and how house prices are.

Lets say in the next five years your £180000 house price rises by about 5% per year ie £45K this will be the additional equity in your property and you will be able to liquidate this equity by increasing your loan by £45k and paying your aunt her £30k and banking the £15k towards your next move up the ladder.

If house prices stagnate/crash over the next 5 years then the opposite happens you will have no equity and will not be able to raise any additional funds to pay off your auntie.

I hope this makes sense it is very early after all.

xanderd

aaah, I understand.

So is the remortgage not based on our salaries as well, like our current mortgage application is?

thanks

alex

AndrewSmith

Yes, it will always be based on your income, value of the property, credit history, existing loans/credit cards etc.

Andy

xanderd

ah, that makes a big difference, as in a few years my income will be a great deal more than it is now due to me graduating from a PhD.

My concern was that if the £180k house rises 5% i.e. by £45k it will be worth £225k. After paying back £30k to my aunt we would be left with an extra £15k on top of the original property price i.e. £195k...so we wouldnt even be able to afford the place we would be living in and would have to go down the property ladder!

If they factor in my pay rise and give us, say an extra £60k instead of £45k that will make all the difference!

We are very unsure as to what to do as we desperatley want to get a mortgage asap, but dont want to risk not being able to pay my aunt back!

The ideal way would be to borrow more from the mortgage lender now, which is possible by adding my aunt as a thrd party to the mortagge but then they will only allow a 15 year term because of her age, which makes repayments impossible. Are there any other ways with my aunts help to increase the mortgage borrowing?

If not, I guess we should be OK to borrow the deposit and pay it back, factoring in my pay rise, and assuming the property market doesn't crash!

Thank you very much for the advice !

brannyrhino_2

xanderd wrote:

ah, that makes a big difference, as in a few years my income will be a great deal more than it is now due to me graduating from a PhD.

My concern was that if the £180k house rises 5% i.e. by £45k it will be worth £225k. After paying back £30k to my aunt we would be left with an extra £15k on top of the original property price i.e. £195k...so we wouldnt even be able to afford the place we would be living in and would have to go down the property ladder!

If they factor in my pay rise and give us, say an extra £60k instead of £45k that will make all the difference!

We are very unsure as to what to do as we desperatley want to get a mortgage asap, but dont want to risk not being able to pay my aunt back!

The ideal way would be to borrow more from the mortgage lender now, which is possible by adding my aunt as a thrd party to the mortagge but then they will only allow a 15 year term because of her age, which makes repayments impossible. Are there any other ways with my aunts help to increase the mortgage borrowing?

If not, I guess we should be OK to borrow the deposit and pay it back, factoring in my pay rise, and assuming the property market doesn't crash!

Thank you very much for the advice !

There is no real other way you can do this.

By borrowing the £30k from your aunt she puts her £30k at risk that you can't pay it back in five years.

By adding her name to the mortgage as a 3rd party or Guarantor she put herself in even greater risk as then she becomes equally responsible for the full mortgage and not just the £30k if anything went wrong.

There is always a risk that you wont be able to pay your aunt back in the same way there is a risk that you can't pay the lender back due to changes in personal or market circumstances.

As long as you both understand the risks and agree a contingency the best option is to accept your aunts generous offer imho.