Should we add on to our mortgage?

Helenl_8

Hello,

We are not very clued up around mortgages so were hoping for some advice / opinions.

In 2005 we brought out home under a government equity loan scheme to help first time buyers. This was a poorly publicised scheme that finished the week after we applies and were successful for it. It means essentially that the government paid for (& own) 17.5% of out home and they will take back 17.5% when we sell which enabled us to have a better deposit.

The time has come where we want too be but the house is not doing very well on the market and that is selling it at a possible £6000 loss.

This has left us considering the renting out option, however to do this we would need to buy the government out (you are not allowed to rent out house if you used the equity scheme). We couldn't afford to do this and then still have a decent deposit for a new house (& the new 5% schemes don't allow you to use them to rent out your existing property).

This has left us thinking maybe the best option is to add the 17.5% on to our current mortgage and I will be making an appointment to disused how we would do this / if it is possible.

Just wondered if any mortgage savy people think this is a good idea or not.

Thank you
Helen

opinions4u

How much is the property worth?

What's owing on the mortgage?

These answers may kill off the borrow to buyout plan.

Helenl_8

Hello,

Property currently valued around £125,000 by estate agents (on market for £130,000).

We owe around £96,000. The letting market is quite good here and we could cover mortgage with rent.

Thank you for any advice,
H

getmore4less

How will they work out the 17.5% if you don't sell?

kingstreet

The HCA HomeBuy Agent (Metropolitan) gets an independent surveyor to value. I suspect the valuation will be too low, as most lenders won't support additional borrowing above 80% of the value.

http://www.myfirsthome.org.uk/

Nebulous2

Do you 96k total or 96k plus 17.5%?

Helenl_8

Hello.

We owe £96000 on 82.5% of the house. The other 17.5% we don't owe anything on as such because we don't own it, the government does.

I have no idea what lending no more than 80% means, sorry.

Thank you
H

kingstreet

FWIW, you own 100% of your home and the Govt has a second charge over your property for the other 17.5%. That is how shared equity works.

Your lender may only lend upto 80% of the value of your property in total, so if you are already over that, you aren't going to be able to borrow more.

Check.

Helenl_8

Oh, that makes sense. I see what you mean.

Useful to know. Thank you

Helen