Last minute advice before I sign

sparklewing

Ok I am about to get a secured loan type thing, which I keep reading all over this site is the worst idea ever so if I outline what I've set up(if it is a successful application) can you guys tell me what I'm missing that is so horrendous.

Have a mortgage of 45k with halifax, am 3 years into a 5 year fixed rate mortgage.

Flat needs some serious improvements the windows are rotting and leak and the toilet leaks really badly, I can't afford to get the work done right now and they aren't jobs that can wait until I save up. For the same reason an unsecured loan is out because I have only been in my new employment 2 weeks and to borrow the amount I need it would cost £150 a month.

So I have arranged with halifax to have flat resurveyed and valued again(was valued at 45k when I bought it) Halifax expect it to be valued at at least 55k in line with other properties in the area.

If it is valued for this they will add 10k to my current mortgage same interest rate(5.5) as the rest of the mortgage fixed for 5 years(so a bit longer than the rest of the mortgage).

I can make overpayments at any time and I only have to pay early repayment charges if I repay it in first 5 years(starting at £500 and reducing each year).

AS I am in Scotland and the system here is 'offers over the asking price' I would more than likely get more than the valued price for the flat if I sold it. For example identical flat(with the windows done) below me sold for 68k 6 months ago and a similar one nearby sold for 90k last week so I feel fairly secure that I'm not going to end up selling at a loss(plan to sell in next few years).

So I add 10k to my mortgage, at the same interest rates and I pay an extra £50 a month.

Have checked with a few estate agents and they all assure me that I would get the 10k I spend on the flat back when I sell it ie it would increase the flat's selling price by around 10k if I do the work.

So in conclusion, this is in essence a secured loan yes? It is marketed as a 'homeowners loan' anyway. I just can't see what is bad about it. My selling profits(if the market stays the same, and who can tell) will stay the same either way as by spending 10k I'll be getting more in the selling price.

So hit me with it why are they evil what am I missing?

sparklewing

Hmmmmmmm do I assume from lack of warning that the loan/mortgage extension is the most sensible way to do things and sign OR is it such a bad idea no-one can be bothered going into the hundreds of reasons why.

regularsaver1

you are doing a further advance on your existing mortgage to do home improvements. different to if you were doing debt consolidation.

if it improves things then why noyt. but your decision

zico_2

Hi Don't think you are doing anything wrong. What you are doing appears to be the cheapest form of borrowing for home improvements and consequently increases value of your home. I think the horror stories arise when people secure a loan, from somewhere other than their mortgage lender at a higher interest rate than mortgage, on their home, to fund other things, ie, not improve their home or the value of it. Hope you get a warm and dry home!

sparklewing

got 4 sets of window quotes getting done tomorrow so if my application is successful I can get the work done asap before winter properly sets in! So excited hope I don't get rejected now!

mrcow

Remortgaging (or similar) for home improvements is often the only way you can afford the work. It seems an okay plan to me.

(The problems you've been reading about crop up when someone has say twenty thousand pound of unsecured debt aready and then decides to put it all against their house over 15 years, end up owing a company like First Plus £60k with some really expensive PPI to boot. Oh and to add insult to injury, they then keep all their credit cards and repeat the process of racking up a further £20k of unsecured debt on top of all that.)