Equity Loan question

m00se1986

Hi all,

A quick and hopefully simple question! I am investigating mortgage options, not looking to buy immediately but hopefully within the next 12 months. Could someone advise me how to correctly use these mortgage calculators when taking an equity loan into consideration? Should I include the equity loan component as part of my deposit?

Using the Barclays mortgage calculator as an example, this only asks for the property value and deposit. If I were looking to buy a property worth £200,000 (just an example) and was providing my own deposit of 5% and then a 20% Equity Loan (total 25%) would I put down a deposit of £50,000? Or are these calculators not accurate when using Equity Loan? If so does anyone know of any that do work with Equity Loan? I'm really just trying to get a rough idea of figures at this stage.

Many thanks!

TrickyDicky101

Are you hoping to determine:
1) The maximum amount you can borrow; or
2) You know the amount you need to borrow and want to work out the monthly repayments?

(1) will be impacted by the equity loan as you won't have a full range of mortgage options available.

kingstreet

Are you buying a newbuild?

Is it in England, Wales or Scotland?

m00se1986

Hi there,

I have a rough idea of how much I will need to borrow, so more (2). At this stage I am just trying to get a rough comparison of various options that may be open to me, Equity Loan being one of them.

My main question is how I include the Equity Loan component in the mortgage calculators... If I were putting down a 5% deposit and had a 20% Equity Loan would my LTV effectively be 75% or would the lender still view this as 95%? Does the Equity Loan form part of the deposit? Is it even possible to use the calculator since, as you say, it wont be a normal 75% mortgage it would be a specific Equity Loan one.

Perhaps the question should be "Is there any easy way to compare Equity Loan mortgages"?

Thanks!

m00se1986

If I were to use the scheme it would be NewBuild (if I am correct it has to be?), and England.

kingstreet

Yes, it's newbuild only but you'd be surprised by the number of people who come on here and think it isn't.

Most lenders have specific HTB - EL products.

If in E&W, the equity loan will have a cost after 5 years, so lenders usually ask that 3% or 4% of the loan be factored into affordability for that future cost.

You really would be better discussing this with an independent mortgage broker, rather than trying to tiptoe through the lender requirements without guidance.

m00se1986

Thanks, yes I will certainly be discussing it more thoroughly with a specialist, I was really just doing some casual comparison and research of the options that might be open to me at this stage (or trying to!). I don't want to go into this totally blind.

Idiophreak

kingstreet wrote: »

You really would be better discussing this with an independent mortgage broker, rather than trying to tiptoe through the lender requirements without guidance.

^^^ this.

I tried to do research on my own when I did something similar. Called a broker and 90% of what I'd found was completely useless for one reason or another. Best just to start with the people who know what they're talking about.

kingstreet

What are you trying to establish?

Is it the products, or is it affordability?

If it's the former, as I said, most lenders have specific products and some don't publish them as they are available via brokers only.

If it's affordability, lender calculators tend not to be interested in deposit or loan to value but in income and outgoings. It's then you have to make the allowance for the future cost of the equity loan but when you've worked out what you can borrow, you add the equity loan and deposit to that to get your maximum purchase price.

There is also a HCA calculator which calculates affordability and it often allows less than a lender would, so you may find that more restrictive as it is governed by 45% debt to income, 4.5 x income and uses a mortgage rate of 4.8%.

You will have your transaction go through on the lowest output, be that the HCA's or the lender's.

m00se1986

Hi,

Thank you for your replies so far.

My situation is that I will be looking to apply in about 6 months time (this is why I haven't yet spoken to a specialist - it seems a way off yet?).

I have been working hard to clear off the reminder of my debts (which I had sitting on 0% cards), so by the time I need to apply I expect I will only be able to put down 5-10% deposit.

I am really just aiming to get some idea of the monthly repayments that I might incur with the different types of products (e.g. comparing what the monthly repayments might be with a standalone 95% mortgage over a 75% Equity Loan mortgage), as well as the pros and cons that come with these schemes.

kingstreet

In which case you're going to have to research your options in detail and how they will impact on you.

A broker in real life would probably work through this with you in advance of what you want to do and leaving it until stuff is actually paid off is going to lengthen the time to your actual move quite dramatically.

Mortgage lenders work on what credit you will have from completion onwards, rather than what you have now. We're dealing with enquiries now for property which isn't going to be ready until towards the end of 2015.

Frankly, you need advice now, rather than waiting for what you perceive is a point you think you're more attractive to a potential lender. This is also going to see upwards of £20k, possibly more added to the price of the property you eventually want to purchase, as every new release sees the price increased.