Maximum I can borrow and spend?

boltneck123

Hi all,

First let me apologise if this has already been asked before. However, I have searched the forum briefly, but have soon realised I may be searching for years to come, given the vast amount of threads made.

Me and my brother are currently saving to buy a house, over the next year we will have between £8k-£10k, which should see us borrowing somewhere in the region of £80k-£100k. Something that we would like to do, and despite Google searchers we cannot find any coherent answers on is; We would like to borrow the maximum amount we can, which we have calculated at roughly £90k on the calculators on the bank's websites (of course we understand this is not a guarantee, but just a rough guide).

If approved of this rough amount, could we purchase a £50k-£60 house, a small terrace house, and keep the remaining £30k-£40k to make renovations, buy furniture, purchase a car each and have some left to go on a well deserved holiday (not to fussed about the holiday though)?

I realise this may be a simple yes or no, but clarity is something I personally need.

Kind Regards,

Ben. (Oh and brother Tom )

GMS

Simple answer is no.

You can borrow against the security (property) value only. Nothing over and above this. Generally 95% is the maximum (some 100% with guarantors)

The 90k you have found as a figure will be based on earnings.

boltneck123

Yes that is right they ask us what our incomes are.

I understand that they lend for the value of the home and that home is used as security against the loan if things go wrong. But what if I could guarantee the security of the extra £30k-£40k, for instance against another property?

GMS

Raise the additional against the other property first.

Does the other property belong to you and your brother? Does it have a mortgage on it?

boltneck123

The other property is owned by our parents and the mortgage outstanding is about 4 years. Which of course will have reduced further come the time we decide to begin our search.

Yorkie1

I don't think you will be able to raise the money on your parents' property - they will have to do that because the names on the mortgage and the deeds need to match.

blargh

boltneck123 wrote: »

If approved of this rough amount, could we purchase a £50k-£60 house, a small terrace house, and keep the remaining £30k-£40k to make renovations, buy furniture, purchase a car each and have some left to go on a well deserved holiday (not to fussed about the holiday though)?

Based on my income / affordability calcs, I could borrow £240k for a mortgage, but I am in fact only borrowing £110k. Do you think my bank would be happy to lend me another £130k for a car, furniture, holiday, gold teeth, jacuzzis etc.? Just a more extreme example of what you're asking, but I'm hoping it makes it clear just how absurd such a request would be

Trollfever

If approved of this rough amount, could we purchase a £50k-£60 house, a small terrace house, and keep the remaining £30k-£40k to make renovations, buy furniture, purchase a car each and have some left to go on a well deserved holiday (not to fussed about the holiday though)?

This died with the death of Northern Rock.

boltneck123

Blargh, having an extra £30k to make renovations to increase the value of the property and then to purchase ourselves a new car each with whatever is left is not a terrible thing to do! Buying a property and then going out and buying a car each on finance (probably costing more in the long run), would be a stupid move, increasing our monthly out goings. With our combined income we can easily afford to pay the monthly payments on a £90k mortgage and still live quite well. In addition to which, our jobs, in respect to other sectors, are quite secure. We work in the care sector and while it pains me to say this, there are always going to be people that need looking after.

In addition Blargh, who said anything about a jacuzzi; I was thinking more a long the lines of double glazing, central heating and a new roof etc. You know the sort, those sensible renovations most people make. That are warranted when purchasing a house that could be considered some what of a project. If you like to waste your money on thriftless purchases such as gold teeth, then feel free, I will be the one with an asset worth selling.

Trollfever, lol could not agree more. However, I can honestly say that £90k for me and my brother would be a sensible amount to borrow on our current income and not experience any problems.

Oh well, it would seem that my plans are going to have to change and be carried out over a longer period.

Yorkie1, I would have thought, that our parents would merely act as guarantors to the remainder of the loan, with their home as security?

Thanks,

Ben.

Yorkie1

No lender will lend you more than the 90% (or slightly higher as described above) LTV. You will certainly not get more than 100%, irrespective of guarantors.

If your parents want to raise additional funds against their house, they are free to do so - but their current lender would have to consent to a second charge, and the new lender would have to agree to being a second charge.

If a property requires the sort of renovation you describe, the lender's expectation is that you will do it out of your own funds and then, if the property value has gone up by the necessary amount, you can remortgage.

boltneck123

Ahh ok then, I am with you.

Thank you, this has helped a lot.

Kind regards,

Ben.