remorgaging against current vale if house.. confused?

Bexm

Hi!

I'm wondering if any of you mortgage bods can give me some advice..
I am considering a hypothetical situation here that we may be in in the future..

Say we buy a house for £100,000 on a 95% mortgage.
In 3 years time, after all our mortgage deals run out we have increased the value of the house to £150,000 due to work we have done.

Would our mortgage then still count as a 95% mortgage (I know we'll have paid some off and it will have gone down a bit...) or will we be able to take out a lower rate mortgage because the loan to value to lower?

I'm just a bit confused!

Bex

dimbo61

IF in 3 years time your home is worth £150K and you have paid a small amount off the mortgage balance so that you owe say £85K then you LTV would be more like 60/65% and not 95%.
Now too small problems in your idea!
1 getting a 95% LTV mortgage in the current mortgage market ( good luck)
2 buying a house thats goning to be worth 50% more in 3 years
Is your Other half a builder with a dad who is a plumber and brother who is an electrician?
Do you like living in a building site ? Have you seen a nice little property begging for an extension thats 50% cheaper than anything else on the street.
Have you been watching too many "homes under the hammer" programmes

Bexm

Thanks for your reply!

Ok.. well 95% mortgage - yup! already sorted.. (maybe got it cos moving house and staying with same mortgage provider)

As for family members being handy.. also a yup (am very lucky!! )

I am not sure if the house would increase in value quite that much.. the numbers given have been made to round figures just to make it easier to explain.. , but the other houses on the street are on the market for quite a bit more than the house we are looking at ( and so far no hugely obvious reason other than cosmetic and a bit of work needed...) and they will accept a lower offer.

I wouldn't like living on a building site, but I don't think I'd have to...

Its more of a question if the house value did increase can we re mortgage at a lower LTV rate.. or do we have to get hefty deposits or how would it work?

jw2003

Bexm wrote: »

Its more of a question if the house value did increase can we re mortgage at a lower LTV rate.. or do we have to get hefty deposits or how would it work?

When you go to re-mortgage for a new deal the LTV would be worked out from what the value of your house then less your outstanding mortgage so, yes, your LTV would change accordingly

We paid £92k last year for a house that is currently "valued" at £135k as a result of the work we have done so it's not unachievable

blueberrypie

Bexm wrote: »

Its more of a question if the house value did increase can we re mortgage at a lower LTV rate.. or do we have to get hefty deposits or how would it work?

Your LTV would be calculated on the value of the house at that point. However it would be foolish to *rely* on the property gaining substantial value in the meantime - even if you do home improvements, there is no guarantee that the market won't fall further, either nationally, regionally or even in your specific street. Also bear in mind that in three years you won't have paid off much of your mortgage - in the early days of a mortgage the bulk of the payments are put towards interest. So I would suggest that although there is nothing wrong with your plan in principle, you should make sure that you would, after three years, still be able to make your mortgage payments, even if the LTV has not improved, even if you are unable to remortgage (nobody knows for sure 95% mortgages will still be available then, so you might be stuck on your lender's SVR), even if interest rates have gone up substantially.

I'm not trying to be pessimistic - just looking at a worst-case scenario. It's better to be prepared for that than to find yourself stuck in negative equity with no options and a mortgage payment you can't meet.

Bexm

Thanks for the replies! That does help!