Calculating equity

Bufger

This is probably a stupid question but i'm trying to plan for the future and was unsure on the results im getting in my calculations! here are the figures:

Bought house in 2009 for £142,000
Deposit of £14,200 (10%)
90% mortgage at 7.99% for 5 year fixed (£128,000)

After the 5 year fix without overpayments i'll have £115,000 left to pay. I'm looking to save £15,000 as an emergency fund that I can put against the loan when it comes to remortgaging at the end of my term to make the total owed as £100,000.

If house prices rise at 4% a year as is forcast (i know but i have to have a figure to base it off!) then the estimated house value would be £164,720.

So paid down to £100,000, house worth £164,720 i would have £64,720 equity in my property by the time the term ends? is this how it works?

I've been worrying for ages that I can pay off enough to get a better rate on a 80% or 75% LTV but now working out exactly how much ive paid and will pay it looks like i shouldnt worry. Am i doing it correctly?

NOTE - I realise i've had to make some assumptions, my property value may not increase that much, circumstances change etc but i need to judge it on the information we have today.

All help appreciated. Sorry for being an idiot!

harvey115

When applying for a remortgage you have to satisfy the standard lending criteria of the bank/building society you are applying to. So everything will be considered:

- LTV
- Your finances

In regards to the LTV, you are correct. The LTV is considered in terms of the Home value. So for example:

At the time of current mortgage
House price = £100,000
Deposit = £10,000 (10%)
Mortgage = £90,000

After five years (when your fix term ends)
House price = £120,000 (say it has increased)
Mortgage amount = £80,000 (lets say you have this much still remaining)
Your LTV is 67%

So the equity in the house is considered to be the LTV when you are doing a remortgage.

You would also need to factor in any costs of moving the mortgage i.e. closing fess, valuation fees, product fees etc if anything applies.

Bufger

harvey115 wrote: »

When applying for a remortgage you have to satisfy the standard lending criteria of the bank/building society you are applying to. So everything will be considered:

- LTV
- Your finances

In regards to the LTV, you are correct. The LTV is considered in terms of the Home value. So for example:

At the time of current mortgage
House price = £100,000
Deposit = £10,000 (10%)
Mortgage = £90,000

After five years (when your fix term ends)
House price = £120,000 (say it has increased)
Mortgage amount = £80,000 (lets say you have this much still remaining)
Your LTV is 67%

So the equity in the house is considered to be the LTV when you are doing a remortgage.

You would also need to factor in any costs of moving the mortgage i.e. closing fess, valuation fees, product fees etc if anything applies.

Thats a great reply, thanks.

I will factor in fees as standard practice and i'm aware of the personal finances and credit affecting the loan decision. It will obviously all depend on circumstances at the time but if they even stayed as they are now this would be good for me.

Thanks again for your reply, very helpful.