Re-mortgaging to help with accessible building work

C-BeeBumbleBee

Hi everyone,

After many years of being a 'reader' on these forums, I have finally taken the plunge and decided to post my first thread so please be kind- I originally posted this on the mortgage forum but received no replies.

Ok, so allow me to explain a little.

- Three years ago we bought a brand new home with a 20% loan from the house builder. That is, 20% of the value of the house.
The loan is interest free for 10 years and then the APR is around 17%. We have not yet paid any of the loan off.

- Since buying the house I have become very ill and much more disabled and we are going to have to make changes to the property in order for our family to live in it with better ease.
Because my husband works we are not able to receive a disabled facilities grant and so will have to pay for this ourselves.
However, because of the changes we are making this will then add value to the property thus making the 20% loan cost go up...

- Obviously we need to make these changes and so not doing them is not an option. However, we are considering leaving the loan as it is as we simply cannot afford to pay any of it off right now and once the 10 years 0% are up, re-mortgaging the house and adding it to that?

I would really appreciate some advice as to whether this is the best course of action to take or if there could be a different option for us.

Many thanks for reading

pmlindyloo

Sorry but am having difficulty understanding this - probably having a 'duh' moment.

You bought your new build 3 years ago with a mortgage and a loan from the house builder?

How does this loan work? When do you have to start paying it back or is it only paid back when you sell?

And what is your question? I know you want to find money to do some work on the house. Are you asking about re mortgaging and how this will affect the loan?

pmlindyloo

Is it something like this?

EasyBuy is a great way to purchase a new home if having a big enough deposit is a barrier to purchase. With EasyBuy, purchasers can own 100% of their own home and pay only 85% of the price, making a £235,000 three-bedroom house at Centenary Quay a more affordable £199,750. Purchasers pay no rent or interest for the first five years and the outstanding loan amount is paid back as a percentage of the property’s value at any time up to resale or after 10 years, whichever comes sooner.

C-BeeBumbleBee

Hi Pmlindyloo

Thank you for replying.
I've just re-read my post and it is a bit garbled, sorry.

Ok, we bought a house, some of it with a mortgage and the other part with a loan from the house builder. The loan is 20% of the total value of the property (so obviously that can change).

We had 10 years from buying the house to pay the loan off at 0% (it has to be paid off in chunks of no less than 5% of the total cost) and then after that the loan APR is around 17%, does that make sense?

So the more our home is worth, the more the loan will increase because it's 20% of the VALUE of the home.
Because we're making alterations, the value of the house will go up and I'm just wondering what will be the best way to then pay off the loan...

I hope that makes sense, I know it's quite complicated! I'm confusing myself! :rotfl:

So in a nutshell;

- We have to make alterations to our property

- But this will increase our house value thus increasing the loan amount

That's our dilemma.

And my question is how we can best do this is the most money saving way

pmlindyloo

What alterations are you making and why do you think they will increase the value of the house? Are you extending? Some alterations for the disabled make it harder for a house to be sold.

As regards the loan. How do they value the house at the time of repayment?

I am no expert but it seems to me that the earlier you pay the loan then the less amount there is to pay?

You really need to speak to a financial advisor about this or perhaps you could click on this thread and repost it on the Mortgage forum now that it is a bit clearer.

C-BeeBumbleBee

Thanks again pmlindyloo

We are building a conservatory to use as a living room (the living room will then become the bedroom) and also a downstairs shower in the existing cloakroom. I don't want it to look 'disabled' but it will need to be completely accessible for me (wheelchair user).

The loan amount is based on an independent valuation of the property at the time of choosing to pay.

Yes, we do need to pay the loan off sooner rather than later but because our priority is making our home accessible in the long term, that's not an affordable option right now.

I wonder if someone in the mortgage thread knows about re-mortgaging and including the loan in the mortgage payments...

tomtontom

The issue with remortgaging now is getting the builder to agree to the first charge (the mortgage company) increasing the amount owed to them. They don't have to, in which case any additional borrowing would be third in terms of repayments (if you were to be repossessed or have to sell with negative equity), and I can't see many lenders wanting to be in that position.

The issue in terms of remortgaging to repay the equity loan in seven years time is, will you be able to remortgage? Bank lending criteria is far stricter than it was even three years ago, plus interest rates could be considerably higher in seven years, your husband could have lost his job and so on.

Is it not possible to move to a more affordable property now without an equity loan?

pmlindyloo

C-BeeBumbleBee wrote: »

Thanks again pmlindyloo

We are building a conservatory to use as a living room (the living room will then become the bedroom) and also a downstairs shower in the existing cloakroom. I don't want it to look 'disabled' but it will need to be completely accessible for me (wheelchair user).

The loan amount is based on an independent valuation of the property at the time of choosing to pay.

Yes, we do need to pay the loan off sooner rather than later but because our priority is making our home accessible in the long term, that's not an affordable option right now.

I wonder if someone in the mortgage thread knows about re-mortgaging and including the loan in the mortgage payments...

That's exactly what I was thinking but outside my expertise.

Do repost the thread on the mortgage board.

C-BeeBumbleBee

Thank you for your response tomtontom

tomtontom wrote: »

The issue with remortgaging now is getting the builder to agree to the first charge (the mortgage company) increasing the amount owed to them. They don't have to, in which case any additional borrowing would be third in terms of repayments (if you were to be repossessed or have to sell with negative equity), and I can't see many lenders wanting to be in that position.

The issue in terms of remortgaging to repay the equity loan in seven years time is, will you be able to remortgage? Bank lending criteria is far stricter than it was even three years ago, plus interest rates could be considerably higher in seven years, your husband could have lost his job and so on.

Yes, both of these eventualities are worries too. We have looked at the re-mortgaging booklet (MSE) and it seems to make some sense but as you said, they don't have to let us remortgage

Is it not possible to move to a more affordable property now without an equity loan?

We have definitely looked at that option but there are very few affordable accessible homes out there so we'd still have to start renovating when we moved

C-BeeBumbleBee

pmlindyloo wrote: »

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That's exactly what I was thinking but outside my expertise.

Do repost the thread on the mortgage board.

I'm a newbie so not sure how to re-post a thread elsewhere

pmlindyloo

C-BeeBumbleBee wrote: »

I'm a newbie so not sure how to re-post a thread elsewhere

I've done it for you so it will be under my user name.

Hope someone can help.