Extend mortgage using equity

BarryRagged

Hi all,

We have a good bit of equity in our property (approx 200k on a value of 300k). I've recently set up a new company and my partner doesn't work. We'd like to extend our mortgage to finance some home improvement work but not sure if it will be a problem that neither of us have provable long-term income. Rookie question but does the equity itself weigh this in our favour or is it still a problem if neither party on the mortgage is working for a company with 3 years of records?

We would want to continue paying the same monthly amount so extend the term (up from 20 years) instead of paying more. Can anyone provide some initial info on how this could work?

Thanks in advance!

kingstreet

You'll need at least one year's trading history (two in many cases) and evidence of income in the form of HMRC SA302(s). A lender will typically lend about 4x your net profit, after credit commitments, childcare costs and dependents.

BarryRagged

Hi kingstreet,

Thanks for your response. Just to be sure you understand our situation, I am not looking to seek finance using my income potential. I was hoping we could extend the mortgage using the large amount of equity we hold in the property (we own about 2/3 of the house).

Does this count for anything?

Thanks again

Let_Us_See

No.

All borrowing is income and affordability backed.

CLAPTON

BarryRagged wrote: »

Hi kingstreet,

Thanks for your response. Just to be sure you understand our situation, I am not looking to seek finance using my income potential. I was hoping we could extend the mortgage using the large amount of equity we hold in the property (we own about 2/3 of the house).

Does this count for anything?

Thanks again

equity in your property will not pay the monthly mortgage payments: so the lender will look to your income to do this

the amount of equity may well mean you get a lower APR than otherwise.

kingstreet

BarryRagged wrote: »

Hi kingstreet,

Thanks for your response. Just to be sure you understand our situation, I am not looking to seek finance using my income potential. I was hoping we could extend the mortgage using the large amount of equity we hold in the property (we own about 2/3 of the house).

Does this count for anything?

Thanks again

I understood your situation but didn't want to offend with a simple "no you aren't going to be able to do this", by explaining what would be possible and when.

Self-certification is long dead.

BarryRagged

Thanks all,

kingstreet you wouldn't have offended me - I'm good with straight answers.

Ok so I get this and did suspect this was the case. However I have an existing mortgage and I don't want to increase the monthly payments (I want to extend the length of it). So nothing in the short term would change. If I can't make the repayments then this is going to affect me in the same way regardless of whether I can extend or not. Seems odd to me that could can't borrow against provable value.

The other thing to mention is the repayments are quite low (lower than rent in my area). Obviously without 2-3 years of records for the new business I can't prove I have regular income but again, the mortgage is cheaper than rent in a much smaller house.

Clapton you said equity won't repay the mortgage which is true but it does guarantee the bank they won't lose money.

Thanks again all

CLAPTON

BarryRagged wrote: »

Thanks all,

kingstreet you wouldn't have offended me - I'm good with straight answers.

Ok so I get this and did suspect this was the case. However I have an existing mortgage and I don't want to increase the monthly payments (I want to extend the length of it). So nothing in the short term would change. If I can't make the repayments then this is going to affect me in the same way regardless of whether I can extend or not. Seems odd to me that could can't borrow against provable value.

The other thing to mention is the repayments are quite low (lower than rent in my area). Obviously without 2-3 years of records for the new business I can't prove I have regular income but again, the mortgage is cheaper than rent in a much smaller house.

Clapton you said equity won't repay the mortgage which is true but it does guarantee the bank they won't lose money.

Thanks again all

You are now a higher risk than previously: if asked today they probably wouldn't give you your current mortgage so there is no sensible way they would increase it.

BarryRagged

Yeah I understand Clapton, thanks. It was worth asking on here though, before wasting time at the bank

BarryRagged

Sorry to open this up again but just a quick follow up question. I'd like to chat to our current lender in addition to others simply to understand our options.

Is there any risk in informing our current lender that our situation has changed?

Thrugelmir

There'll be no issue with your change of circumstances in terms of your existing situation. However additional borrowing will be be impacted.