Remortgage confusion

SCUD

Hello guys,

When you take a mortgage for the first time, you need to pay some of the house price and the bank will lend you the rest.

But how about remortgaging? do you also need to pay something in advance?

example:
interest only mortgage taken 2 years ago.

House price £150,000
money paid to bank at start: £30,000
Loan taken from bank: £120,000



how the remortgage works on the above example?

bigadaj

House is revalued before the remortgage, so the actual current value is determined. The difference between this valuation and your outstanding mortgage would be you new depsoit, obviously if prices have fallen and there is no equity there can be problems. This normally translates that you are stuck on the standard rate with your current lender and can't get a better deal elsewhere as there is no equity in the property.

If your examp,e is your actual case then the. Fact you are on interest only means that you haven't paid back any capital, though the 20% deposit should mean there is equity in the property. Interest only mortgages can be difficult to come by now, which mean you might have to take out a repayment mortgage, which is significantly mor costly.

Thrugelmir

If you stay with your existing lender. Then your mortgage will merely switch to another product.

If you switch lenders then you will go through a similar mortgage process application as you did at the outset.

You'll struggle to obtain an interest only mortgage with a new lender.

So would be worth thinking about how you intend to repay the debt.

kingstreet

The deposit wasn't paid to the bank. It was added to the mortgage money and paid to the vendor.

If you decide to remortgage, you take the estimated value of the property and the amount you need to borrow and the difference is the current value of your deposit, what we now call equity.

The mortgage amount, divided by the property value is still the loan to value and this will determine the mortgage rate offered to you.

You will probably not get interest-only again, if you don't have a credible repayment plan in place.

SCUD

thanks a lot guys... it is clear now

one more thing...
who values the house?

kingstreet

A surveyor instructed by the lender you choose for the remortgage.

SCUD

many thanks kingatreet