Secured loans and remortgage

PhoenixB

Hi Everyone,

New to this forum and want some adivce - plllleeeaassee!!!

My partner and I want to get a secured loan of 30k over 15/20years to consolidate and for some home improvements. We have a mortgage of about 105k and the house is about 155k in value. If we get this loan will it affect our remortgage in dec 09 and will we be able to borrow enough to cover paying off this loan. Any advice appreciated

jonesMUFCforever

Why will you re-mortgage in 2009?
Is it that you have a fixed rate until then?

It will depend on a number of factors - your repayment history, salary and what happens generally in the mortgage market.
Mortgages may be harder to get then if Northern Rock and others continue to struggle borrowing money on the money markets.

MarkyMarkD

Irrespective of having a fixed rate until December 2009, it's daft to get a secured loan of 30k on top of a mortgage which is only around 70% LTV.

Get a further advance from your existing lender for the £30k. Then switch products or remortgage in December 2009.

If your existing lender won't do you the £30k, then you probably shouldn't be borrowing it.

PhoenixB

We have a fixed rate till Dec 09, . We are not able to borrow anymore from our mortgage company UCB, although I don't see why as our house is valued at 155k and we only borrowed 105k. We just wanted one payment coming out in stead of 3 different ones. SO I am presuming that its probably not a good idea then???? What do you suggest then - I know its down to us at the end of the day but do you think we should go back to our f/advisor, also Mark what do you mean by 70% LTV (I know its loan to value but where does the 70% bit come from)

MarkyMarkD

105/155 = 68% (nearly 70% but I was doing it in my head). In other words, your £105k loan is only 68% of the value of the property = 68% LTV.

If UCB won't lend you the extra £30k, I presume it's on income grounds rather than any other reason - increasing the LTV from 68% to 87% is unlikely to put them off. That's why I suggest that it is a bad idea to get the extra money from somewhere else.

I wonder whether it's quite likely that in 27 months' time you would be able to remortgage and consolidate everything into one sensible mortgage with a sensible lender, assuming that you use that 27 months to deal with your outstanding debts and that you put off your home improvements.

Although it might seem a good idea to get a secured loan now, it will then almost definitely involve penalties in 27 months' time when you seek to get it all consolidated properly, meaning that the overall cost of consolidating twice will be quite high.

Unless you really cannot afford your payments at the moment, I would counsel against taking this route.

When you say UCB won't lend you any more, do you mean any more in an absolute sense or just that they won't give you the full amount you want? If they'll do the consolidation, but not the home improvement part, it would be worth taking that much from them and going back for the home improvement bit later on.

MortgagesInc

I would re-iterate what Mark says above - it depends on how desperate you are for the money, and for what parts of the money.

If you can wait for the home improvements then fine. If not, are you saving much by consolidating anyway? If so, and the home improvements are imperitive, then you could get the secured loan, and restucture it in 2 years time - your penalty may be 2/3 months interest on the secured part, so you would have to calculate at that stage whether it's worth consolidating in to a new mortgage.

PhoenixB

I have made an appointment with the people that we got the mortgage from and he has said that as long as we dont get a secured loan for over 25k and that the redemption penalty is no more than one months interest then when we come to the remortgage in 2009 then we shouldn't have a problem covering the whole amount with a mortgage!!! However we are going to discuss it more tomorrow. We didn't ask UCB about extra to consolidate but to borrow extra on the mortgage, however I suspect that its much the same and the answer would be the same too. We have estimated by getting settlement figures for our outstanding debts plus what we need for home impro's that 25k would be ample, but as I say we will see tomorrow.