Remortgaging for the first time / extra cash for new kitchen?

19lottie82

Hi – I purchased my flat as a FTB in 2009 on a 3 year fixed rate mortgage with the Halifax.

The flat was advertised and valued at £110k, but I paid £105k for it and put down a 25% deposit.

My fixed rate is coming to an end in July, so in April I will start looking for a new fixed rate mortgage, with the hope of taking out a bit of extra cash on it for a new kitchen, as mine is pretty grotty and old.

My questions are………

1) As the best mortgage rates are at 75% LTV, does this mean the maximum additional borrowing I will be able to access is what I have paid off during the last 3 years (£2.25 k) – any fees associated with re mortgaging?
2) Will the LVT amount be based on what I paid for the property, or what it is valued at NOW?


Any other relevant advice or info would be more than welcome, thanks!

Charlotte

19lottie82

PS I have an excellent Credit History, if that makes any difference anywhere down the line.

kingstreet

19lottie82 wrote: »

As the best mortgage rates are at 75% LTV, does this mean the maximum additional borrowing I will be able to access is what I have paid off during the last 3 years (£2.25 k) – any fees associated with re mortgaging?
2) Will the LVT amount be based on what I paid for the property, or what it is valued at NOW?


Any other relevant advice or info would be more than welcome, thanks!

Charlotte

If you're planning on staying with Halifax, you'll be asking for a product transfer with additional borrowing. You'll be reliant on the Halifax indexed valuation system which tends to be very harsh on borrowers. It may be worth paying the £70 for a drive-by or even an inspection, if you think the value may have improved.

You'll be limited by the 75% loan to value limit if you are set on a sub-75% product. That's up to you to decide if you want the rate, or the extra money.

If you decide to remortgage, you can probably find a new deal with a new lender with no transfer costs and where you'll get an inspection and hence a better chance of a higher valuation.

19lottie82

Thanks Kingstreet,

I have no real loyalty to Halifax, I will be going to who can offer me the best deal, in terms of rate, additional borrowing, fixed term length.

What is a Drive By / Inspection? A re valuation?

I'm not really sure what a valuation would throw up. As I said in 2009 the flat was valued (by 3 different valuers) @ 110k and I paid £105k. Last year a similar flat in the block next door went for £110k after beign on the market for 2 weeks, but I'm guessing this makes no real difference in the terms of a possible valuation?

If it DID get valued at £110k, does this mean I could borrow @ LTV of this valuation? An extra £1250 would help me out a lot in terms of a new kitchen budget!

I would definitely want to stick with a 75% LTV loan to get the best rate I can.

"You'll be reliant on the Halifax indexed valuation system which tends to be very harsh on borrowers." - Can you explain this is a little more detail please?

Thanks again for your help.


Charlotte

DannyboyMidlands

Rather than withdrawing your equity, why not just:

a. Save up the money for the kitchen? or

b. Stick it on an 12/18 month interest free credit card and pay it off within that time?

19lottie82

DannyboyMidlands wrote: »

Rather than withdrawing your equity, why not just:

a. Save up the money for the kitchen? or

b. Stick it on an 12/18 month interest free credit card and pay it off within that time?

DBM - I have considered those options but they are not really viable for me right now.

kingstreet

19lottie82 wrote: »

What is a Drive By / Inspection? A re valuation?

When you bought the property your valuation was an inspection. The surveyor came inside the property. A drive-by, as its name suggests involves the surveyor looking at the property from the outside only.

I'm not really sure what a valuation would throw up. As I said in 2009 the flat was valued (by 3 different valuers) @ 110k and I paid £105k. Last year a similar flat in the block next door went for £110k after beign on the market for 2 weeks, but I'm guessing this makes no real difference in the terms of a possible valuation?

It may be a "comparable" used by a surveyor to value yours.

If it DID get valued at £110k, does this mean I could borrow @ LTV of this valuation? An extra £1250 would help me out a lot in terms of a new kitchen budget!

I would definitely want to stick with a 75% LTV loan to get the best rate I can.

The remortgage you are planning will create the loan to value. If you want to set yourself an upper limit of 75%, the amount you can borrow will be 75% of what the property is valued at by the surveyor.

For example, 75% of £110k is £82,500. You probably have around £75k remaining on your current mortgage, assuming it's capital & interest, so you'd have around £7,500 if you went as high as 75%. If the value is less than £110k, the amount you can borrow will fall accordingly if you wish to stay within 75%.

If the property is, for example, valued at £100k, you'd only be able to replace your current mortgage and would not be able to borrow more with your self-imposed 75% limit.

You'll be reliant on the Halifax indexed valuation system which tends to be very harsh on borrowers." - Can you explain this is a little more detail please?

Halifax uses a "desktop" computerised valuation system when you ask for a product transfer and additional borrowing. It doesn't have the flexibility to take into account improvements you've made and often fails to reflect changes in local/micro markets where price movements don't reflect larger/national changes.

19lottie82

Great, thanks again.

I guess it would be wise to get an independent valuation before I start looking at re mortgage deals. As I said, I really have no idea what it's worth at the moment, but 5k either way could make a big difference to me!

kingstreet

Find a fee-free remortgage deal and go for it. You get a free valuation, so if it doesn't stack up you've spent nothing to find out.

I'm out tonight doing a fee-free remortgage where the borrower wants a fix. The mortgage isn't enough to make it worthwhile paying any fees, so there are better rates, but not for this borrower.

It's 3.49% fixed for two years, no valuation fee, no arrangement fee, no legal costs to pay and only £35 telegraphic transfer fee. £300 cashback on completion on top.

There are plenty of similar deals - fixes and trackers with similar features which would probably suit you.

Have a look around online, or talk to an independent or whole market broker if you prefer.

Catslovelycats

Just a thought: Have you sat down and worked out how much this kitchen will ultimately cost you if you put it on your mortgage?