Mortgage or Remortgage from family loan

Dominik

Last year my wife and I bought our first home together with help from my parents. We couldn't get a decent mortgage even though we had a high deposit and therefore my parents lent us the money. Currently we are paying them back monthly with interest and have drawn up a mortgage agreement between ourselves.

We are now looking to get a mortgage so that we can pay my parents back. However I am not sure whether we should be looking for a remortgage or mortgage. Can anyone help?

GMS

If you are the registered owner of the property then it is a remortgage.

What is the situation with your parents? Are they registered as joint owners of the property, or do they have a charge on it?

getmore4less

You do realise that paying interest to parents becomes part of their taxable income?

Remortgage

Dominik

GMS - Thank you for your response. My parents are not registered as joint owners of the property or have a charge on it. My wife and I are the only persons registered as owners of the property. We set up an agreement with them as if they where a financial institution lending us the money.

Getmore4less. Thank you for your reply. I know that the interest is deemed as part of my parents taxable income and thank you for confirming that it is a remortgage we should be looking at.

GMS

Remortgage application is what you need with the funds being used to repay a family loan.

How much do you owe your parents?
How much is your property worth?

Dominik

I owe my parents around £130,000 and the property is worth around £270,000 (going on how much two smaller properties have been put on the market for recently). Which leads me to another question. When I apply for a remortgage does the lender value the property or will I need to get an independent valuation? As you can see I'm new to this.

GMS

The mortgage lender will value the property for their own purposes, to ensure it is suitable security for them.

You will need to be careful with the application. Some lenders would not allow a loan of that level for debt consolidation, and as the property has no charge on it you could not really class it as a mortgage.

You may be best seeking advice from a 'Whole of Market' broker.

At under 50% Loan to Value there should be great rates available to you, assuming you meet all criteria.

Dominik

Thank you again for your advice GMS

dimbo61

Now you have put a value of £270K on the property but dont be surprised if the valuation is more like £250K