Reason for borrowing extra on a mortgage?

hollywoodch

Hello all,

I have a daft question, but one that I can't find an answer to anywhere.

It’s to do with giving a reason for extra borrowing on a mortgage. I have had a brief conversation on the phone with my current mortgage supplier and in principle on affordability; they have said that the amount I wish to borrow could be possible, subject to more in depth checks.

I was asked on the call about why I want the extra money. My question is that I wondered about what proof they may therefore need on the actual spend of this extra money down the line? Would they want proof on any future spend in terms of receipts / follow up checks etc?

The situation is that I have nigh on completed an extension but borrowed from a family member to do so. Their personal situation has changed and they'd like the money back sooner than we'd originally agreed. So strictly speaking, the money I’m borrowing on top of my mortgage will be used to pay back a family member, to pay for home improvements, but on a technicality, it's not directly being spent on home improvements.

Would this be an issue? Also, I'm sure like many who borrow extra, I'd like to just swell my bank balance too with a little more that wouldn’t be on home improvements, would there be any issue on this?

Completely broadening the question, what checks are in place should anyone borrow more on the mortgage and then not spend it on areas that they originally say the use was for?

If the money is paid back as agreed what come back (if any) would a lender have in these types of situations?
As I say, I’m sure this is a daft question, but any help / advice gratefully received.

lee111s

You're using the money for home improvements. I wouldn't say what you're doing is fraudulent.

muhandis

The couple of times that I have taken out a personal loan (unsecured debt and hence more risky for the lender) in the past, I have never been queried on or asked to prove whether I spent in on what I said in my application.

Borrowing extra on a mortgage is essentially a bank lending you money based on their charge on your house ie far less risky than unsecured debt. I doubt they'd care enough to check what you do with the money after they've lent it to you. Having said that, I've never borrowed extra on my mortgage, so can't say for sure from experience.

I think you might be overthinking it a bit.

[QUOTE=hollywoodch;71
435041]Completely broadening the question, what checks are in place should anyone borrow more on the mortgage and then not spend it on areas that they originally say the use was for?[/QUOTE]

kingstreet

Lenders will class this as debt consolidation and may apply a lower maximum loan to value as a result.

hollywoodch

Thanks Lee111s.......I just didn’t know how much detail to go into when it comes to the further checks that they'll do. I don’t want them to renege on the offer of extra money on a ‘technicality’ and that just got me thinking about what ‘proof’ lenders ever may seek to show you spent funds where you said that you did.



Could you borrow tens of thousands citing 'home improvements' but actually blow it on a sports car!? (I'm NOT planning to do that by the way, but just intrigued by what comeback they'd ever have or how you may need to show you spent it where you said you did!)

hollywoodch

I may well be.....its the first time that i've borrowed more on the mortgage and like, techncially it's not going to spent on home improvements as I told them that it would be.

Thrugelmir

If the money has been spent on "home improvements" you've the evidence i.e. invoices and physical goods to evidence the fact. Also that you can show the money being lent to you from the family member.

As it maybe the case that a surveyor will be sent round to value the property.

Worth noting that not all improvements add value nor does the VAT element of the spend add value either.

hollywoodch

Thanks Thrugelmir - do you think that such 'post-lending' spotchecks are commonplace? Wouldn't the surveyor be most likely sent before lending happens though, rather than after? Or are you suggesting both?

ACG

Who is the lender?
How much is your current mortgage?
How much extra do you want?
How much is your home valued at as it stands today? (not when the works are complete).

hollywoodch

Hi ACG

Who is the lender? - Santander
How much is your current mortgage? - £140,000
How much extra do you want? £50,000
How much is your home valued at as it stands today? (not when the works are complete) £250,000

Thanks in advance!

ACG

You might be alright...kind of.
According to the santander website they go up to 75% for debt consolidation. Which is £187,500. So "only" £2500 shy of what you need.