Applying for a loan before mortgage

vase

We need to do some extra works to our house before remortgaging in November to ensure a lower LTV (and to stop me from going insane with mess!). I have a loan that has a settlement figure of £12300; taken out to do reburbishments), thinking of taking a new one out to cover that and leave some for further work, so about £18000. How detrimental would it be with aiming to remortgage in November? Would I be better waiting and taking money out at the same time as remortgage?

Many thanks.

Lemonsqueezer78

The effect of doing this will obviously all depend on affordability. Any loans you hold will be factored in to any mortgage lenders assessment of you as a borrower. And if you already have a loan - and you have clearly not been able to save up the money to make these improvements, that does suggest that your finances may not be all that hunky-dory.

Essentially, you do not provide enough actual figures for anyone to really advise but basically, applying for large amounts of credit (even if some of it is to consolidate existing borrowing) is not a great idea in the run up to a mortgage application. Especially if your finances are tight already.

Your mortgage lender will see your total level of debt rising (do you have any other debt besides the current loan?) and - whilst home improvements are not the absolute worst reason for borrowing - they will most likely wonder what this means.

There is also a degree of risk here in my mind. Apart from taking on a large loan close to a re-mortgage (in itself, not that advisable) there is no absolute guarantee that these improvements will increase the value of your property as much as you hope they might. It depends on what you are planning to do of course, but cosmetic changes may not actually make as much of a difference as you hope in the eyes of a lenders valuer... which may be much more based on the local market than how nice your carpet and walls are. Be careful before take a gamble here.

How exactly would your plan to take the money out at the same time as the mortgage work? If you intend to use the money to improve your home and your LTV, you won't have the opportunity to do that if you are only just getting the money in your hand at the same time as you are applying for the mortgage will you?

foxy-stoat

How will spending £5000 on a property effect the LTV significantly to make any difference?

If you want to apply for additional borrowing, do so after you have remortgaged.

MortgageMamma

You could consider consolidating the existing loan into your remortgage and capital raising for further home improvements. This would mean you would pay interest on the amount borrowed over a longer term than an unsecured personal loan, but if you were bothered about that you could make overpayments to the mortgage to reduce the interest paid on the extra borrowing. Obviously this would all be dependent upon an affordability assessment.