mortgage advice please?

soupdragon99

Hi-- we are about to purchase a house (first time!) with a 25% deposit.

For various historical reasons the mortgage will be with Lloyds (we should have shopped around but thought it would be easier to stay with this, our current bank...! But there we are).

Anyway, our problem is this: we would like to maybe borrow more (additional borrowing?) in about 6-12 months to pay for an extension to the house.

During this time it is possible that my partner's income will rise quite a bit (? not sure how much-- release of some things he's been developing... failing that going full-time at his current workplace- probable increase in income of 20%)

It is possible that the house market will stay stable or slightly increase where we are (!) but anyway, I think we can't *rely* on it going up.

With Lloyds they say they will only go to 80 LTV (so that's 5% more than we're currently getting (75% LTV) and in this case unlikely to be enough to do the work we're thinking of.

We were planning on fixing the mortgage for 5 years.

I guess the questions are:

* in the above scenario is it better not to fix for 5 years but maybe have a shorter term/ different type of mortgage that will be more easy to negotiate in a few months' time, possibly with a different lender?

* how easy is it in the current financial climate to get additional lending

* does anyone know if Lloyds are at all flexible on that 80% LTV figure if income has increased?

Any advice appreciated. We'll have to sign on the dotted line this week some time probably, so need to make our minds up quickly!

thanks in advance!

ACG

Why not borrow more now (put down a smaller deposit) and use the money you have kept back for the extension? Saves all the hassle of having to pay for a valuation in 6-12 months time.

soupdragon99

ah, yes. The bank said 'no' to that (plan A)-- earnings multiple not high enough at the moment.

thanks for your reply though!

Dave_Ham

This is a crazy plan.

You should have just gone to a lender that will lend you the income multiples you need now. Without knowing the details, cannot guarantee but I would have thought that this will work out quite a bit more expensive to do it this way...

How far advanced are you with C&G?

soupdragon99

I think the thing is that we expect our income to go up over the medium term.

Originally our calculations included a bit of self-employed income but we're currently in a research and development phase, so there is insufficient income for them to consider at this point.

We have a firm offer with C&G. I think we can probably change the actual product but not the lender at this point as the vendors are pressuring us to move quickly.

soupdragon99

ps we currently have something like a bit more than 4x earnings multiple from a single earner-- not sure if that is normal in the current economic climate?

Dave_Ham

Then a 5 year fixed makes little sense if you need to raise funds within this period.

This is why sometimes I do not believe the branch "advisors" do the right thing. Other lenders would have lent you more on the same income than C & G are surely that would have been better "advice" then.

You are where you are, I would imagine taking a 2 year fixed, praying the world does not recover financially overnight and then re-financing in 2 years.

If you try and take an additional further advance, whilst this may be great for the advisor who gets double bubble of mortgage and then a further advance; it will be on a higher rate and then you will have 2 separate products running which typically will mean 2 product fees etc. etc.

All the best

soupdragon99

Thanks for the advice.

I think this is what we were thinking was probably the case... except in the time suggested (6- !2 months) won't the situation be the same-- ie we'd need an additional loan/ product if we wanted to do the work during that 2 year period?

I'm not sure it was the advisor, but the underwriters who said 'no' anyway.

Do you think other lenders may have offered us higher multiples? We went with Lloyds because our personal and business accounts are with them... but I don't think it helped at all, in the end.

Dave_Ham

Yes - 5 times is possible depending upon circumstances

Thrugelmir

soupdragon99 wrote: »

It is possible that the house market will stay stable or slightly increase where we are (!) but anyway, I think we can't *rely* on it going up.

Also possible that it may fall.............

If the extension isn't necessary defer the work. Overpay the mortgage instead. Then reborrow the equity at a later date or even move house. May be easier.

jennifernil

Dave_Ham wrote: »

Yes - 5 times is possible depending upon circumstances

Yes, our daughter has gone with HSBC and has 5 times earnings. Under 60% LTV however.