Release equity to fund larger deposit on new home

huzzer84

Hi, myself and my fiancee are looking to buy a house around the time when we get married in August 2012, for around £250k. My latest budget has us having around a £30k deposit by then, if we can get to £37.5k this will be 15%, so will allow us to get a slightly better rate.

I currently own a property 50/50 with my mum, the mortgage on which is due to be paid off in the next few months. The present intention is to keep this stake when I move out in 2012.

While we haven't yet got an agreement in principle, mortgage calculators on halifax and nationwide websites suggest we should be able to borrow around £230k.

Could I extend the term on my current mortgage and take, for example, a £25k advance, so that we could put this toward our deposit on the new home, giving us a 25% deposit and so a 0.8% lower interest rate (based on nationwide's 3 year fixed), thus saving around £1,600 a year in interest?

Thanks.

pramsay13

As far as I know advances are for working on the house in question, although not sure what checks will be done.
One option would be to add a new mortgage to the property, but obviously you will be bound by the current rates and might get tricky with shared ownership if the agreement with your Mum is a legal rather than a casual arrangement.

ViolaLass

You also need to consider that if you borrow to bolster your deposit, the bank will also take your increased debt into consideration although taking the opportunity to borrow at a lower rate may be a good idea.

Does your mother live in the property or is it rented out? (i.e. are you earning any money from it?)

The bank would be the best guys to talk to, to gauge their feelings on the matter (as in the end, it's up to them whether they'll lend you the money).

huzzer84

Thanks - the thing that suggests to me that it may be possible (at least to a limited extent) is that I've built up an overpayment reserve on my nationwide mortgage of £6,000, which is cash that I should be able to take back easily. The thing I'll need to discuss is the impact on how much they will let me borrow on the new mortgage. The agreement with my mum is a casual one, so no major restrictions there.

riverboat2001

We've done something Very similar.
Property A mum lives in rent free, we pay the mortgage. appx 280k equity (Halifax)
Property B house for us to live in (Abbey)

Speak to a mortgage advisor, they should be able to help you out.