Question about borrowing more on property

sturgeon

I own 50% of my property and want to buy the remaining 50% as I can afford to now. I presumed I could easily afford it as my current salary far outweighs the normal multipliers to get the amount I need to buy out the other 50%.

However, after speaking to Halifax today, it seems things are quite different. I need to remortgage to £200k, my current mortgage balance is £65k. The equity I have is around £45k in the property.

I bought my 50% for £75k, so that 50% for both me and the housing company is worth around £120k each as the total value of the flat is £240k.

They seemed to explain that they deduct my current mortgage balance from what I want (so £200k minus £65k) and seemed to suggest I could borrow about £138k (on top of my existing balance of £65k), something to do with 85% of the value.

So it almost totals to £200k, however I presumed that they'd look at my salary and multiply by that to assess how much I could borrow. If buying the full 100% and it's worth £240k, I really don't understand what they were talking about!

anselld

Flat worth £240k
You own £120k
Mortgage balance £65k
Hence, equity £55k

If you want to own 100%...
Flat worth £240k
Minus £55k equity = £185k Mortgage needed.

So you income/ affordability would need to support a £185k mortgage in order to proceed.

Have you had official valuation of £240k or are you just guessing?

sturgeon

Thanks, those calculations make sense.

£240k value is based on current selling prices of other identical flats in my block-which sell within days of going on the market as it's a strangely sought after area right next to a tube station.

The Mortgage adviser on the phone seemed to be telling me that my income doesn't matter for this remortgage, they'd only lend me up to 85% of the value or similar. This is why I was very confused as I presumed they'd take a multiple of my salary to assess affordability, like with any mortgage-even though this is borrowing more on my existing home.

I'm sure she was telling me the max they could lend was £138k-despite me giving no salary info (which is more than triple what it was when I bought this 6 years ago), so it was very odd.

ViolaLass

The total amount you may borrow is not determined solely by your salary but also by the value of your home i.e. the bank won't want to lend you more than the value of your home else they can't get it back (unless they're Northern Rock).

In this case, they've decided they don't want to lend you more than 85% of the value of your home.

Thrugelmir

sturgeon wrote: »

I'm sure she was telling me the max they could lend was £138k-

Perhaps that's based on what they think the property is currently worth according to internal records.

You'd need to make a full application and have the property revalued in order to substantiate your £240k valuation.