Remortgaging a House Owned Outright

Tiners

Sorry if I'm being a bit dim, I have tried to looking into 'remortgaging' on the internet but just about all the results seem to pertain to transferring an existing mortgage to a different deal or provider and that's not what I'm interested in.

My situation is this... I have a cash budget of about £130k, but that leaves me around £20k short of what I need for my ideal home in my area.

Now I could just get a £20k mortgage, but alternatively I could borrow the £20k from family, making the house a cash purchase, then pay them back by remortgaging for £20k once I own the property (I'm guessing I'd have to own for a minimum time period before applying)

In this case would a £20k Remortgage work out simpler and cheaper than just a standard mortgage to buy? Or would there be little to no difference?

Thanks!

N.B. I'm not referring to any form of ''equity release'' deals here, I'm only 35!

booksurr

you said it, you could just get a 20k mortgage...I fail to see what you are trying to achieve by not doing that to start with?

It would not be a REmortgage since you don't have a mortgage to start with so cannot RE anything!

It would simply be a mortgage, it would be at the sames rates as any other mortgage and entail the same costs (valuation, legal fees etc) as any other mortgage. One problem with that, some (not all obviously) lenders have minimum sizes of loans and 20k may not actually be enough for them to grant as a mortgage in the first place. You may find yourself dealing with fringe lenders or having to simply get a personal loan not a mortgage.

Tiners

Thanks for the speedy reply, I know technically it wouldn't be a REmortgage but I was trying to avoid using the phrase ''releasing equity'' as they takes us down another altogether different road!

I just thought the fees and rates might have been slightly more preferential for ''remortgaging'' a house already owned outright as opposed to just applying for a mortgage to purchase the house with, but as you say they're probably no different.

And yes I did also wonder about it being such a small amount, I have ran some of the basic online mortgage calculators from the main high st lenders and they're coming back with figures as low as £22-£23k that they would be ''willing to lend me'' based on the details I put in, so I assume they are willing to go that low?

booksurr

look at it another way. many lenders would regard with suspicion an outright owner who now wishes to raise funding on their debt free property. The lender would be concerned as to why you need the money and what it will be used for, they may then put a premium rate on the loan because you obviously need the money for other purposes and may have overextended yourself on something else - nothing is as simple as it looks about getting a mortgage!

at the end of the day the lender has only 2 main criteria - will you pass the affordability tests and what is the LTV ratio?

you may get the answers you seek if ask your question on the mortgages board rather than here on the buying and selling board??????

http://forums.moneysavingexpert.com/forumdisplay.php?f=15

divadee

Just apply for the 20k mortgage when purchasing!!!! Why bother with the hassle of borrowing of family to then get a mortgage anyway. The rates won't be any different so just do it all in one go. Otherwise you would have 2 lots of legal fees to pay out as well.

G_M

There might be a slight advantage to buying intially for cash in that you can proceed faster. Few sellers will actualy give you a better price but they might prefer you to a buyer dependant on selling a property and/or raising a mortgage.

I doubt there'd be a huge difference in legal fees. Most conveyancers would charge more for acting for the mortgage lender as well for your purchase, but there could be a slight saving in legal costs by doing both at once.

I doubt you'd get a better mortgage deal by raising the mortgage later.

If raising the mortgage later I imagine you could say it was for home improvements.

A loan from family might save you money in interest for however long it takes to get the mortgage later - 6 months?

Things to consider....

bouicca21

That's about the sum I needed when I was buying. I actually had to borrow more because it was too low for the banks to consider.

booksurr

bouicca21 wrote: »

That's about the sum I needed when I was buying. I actually had to borrow more because it was too low for the banks to consider.

same here. My first mortgage had to be for 25k as that was their minimum - oh happy days !

bouicca21

This was two years ago!

Tiners

Thanks again for the replies, so it looks like there are no advantages to raising the mortgage once I own the property and I should just go down the conventional route of obtaining a mortgage to buy.