Switching lender but borrowing more

BB_2013

Hi

Hoping that someone will be able to offer some advise on this........

Me and my partner currently have 42k equity in our 220k valued house. This is just below the magic 80% LTV which will open up new mortgage deals for us - we will be at the 80% by the end of 2013.

However, we both hold debt on loans/credit cards that total approx. 20k. Some of this was on work done on the house, some from long standing debts, and some from the increased costs you experience once startign a family that you just never knew about! The situation at the moment is that we have a comfortable life but there isn't a lot left over once we've paid mortgage/bills/car and regular monthly outgoings.

I would like to pay our outstanding debt by relasing some of the equity in our mortgage. Rough calculations show me that the mortgage payment would go up by approx £200 per month, but this is far less than the circa £600 per month we currently pay on loan and credit card debts.

My questions is whether anybody has any knowledge of how lenders view a new mortgage application that asks for a bigger mortgage amount than what is currently owed? Is this someting that would be entertained? Is it somethign they will offer? Everything I read is about existing customers borrowing more, nothing on new customers. With my current mortgage provider I don't get anything back from the online calculator as they only seem to consider any borrowing that doesn't take you above 80% LTV.

Can anyone offer any advice on this?

Many thanks in advance

P.S. I'm also considering the potential to be able to overpay as well once we get a new mortgage, maybe even reducing the term, but this would all depend on the answer to the above.

kingstreet

It's a remortgage for debt consolidation. Many lenders will consider it, but their maximum loan to value may not be to your liking.

If your property is worth £220k, you'll find the maximum is around 80%, possibly 85% and that will not give you enough to cover your existing mortgage and the amount you need to consolidate.

StuC75

If you're looking for 80% LTV (and just on the verge), but also looking to release that equity then you wont remain within the criteria for the product you are looking to get..

best you would hope for would be to mortgage upto 90% - using that 10%/20k to pay the debts off.. This would all depend on how lenient they were with the present valuation if it is 'ambitious'..

BB_2013

Okay, thanks for the feedback. Further questions (inevitably!).......

- If I was going to a new mortgage provider and asking to borrow 90% LTV (so £198k) because that was what I owed on my mortgage they would probably accept it. What's the difference here? Consolidation considered more risky?

Thanks again

BB_2013

Sorry Stu - didn't see your reply which kind of answers my question.

I am as confident as I can be in the valuation. I am not being ambitious, knowing what houses have sold for recently and knowing the differences between ours and theirs and the work we have had done. If anything I might be underselling it but I'm not about to start playing that game.

I have done the numbers on this and we could more than afford the increase in payments based on the monthly figures. This would free up disposable income for overpayments. I guess its just asking the question of the providers that offer 90% that I need to do.....

kingstreet

Yes. Many lenders will do a 90% remortgage to refinance the existing mortgage, but consider debt consolidation more risky, so limit the maximum LTV accordingly.

Yes, they do check the existing mortgage balance, so you can't inflate it to make it look like a refinance. Just in case, like...!

BB_2013

kingstreet wrote: »

Yes. Many lenders will do a 90% remortgage to refinance the existing mortgage, but consider debt consolidation more risky, so limit the maximum LTV accordingly.

Yes, they do check the existing mortgage balance, so you can't inflate it to make it look like a refinance. Just in case, like...!

Ha ha ha! No smoke and mirrors here! I would actually sit down with a financial plan for them to see as a starting point. Of course, its then down to them. If not, I have an alternative plan it will just take a year or so for me to work through on current payments, etc.