Re-mortgaging to release funds...

A9TNX

Hi all,

We were lucky enough to have our mortgage approved around 15 months ago and are now starting to think about re-mortgaging to release some funds to pay off some debt we had before we bought the house and to fund some home improvements. (currently on a two year fixed deal that will end at 2 year point)We are aware of the risks etc. and are purely looking for some advice on the re-mortgage process itself here, as opposed to whether re-mortgaging is the right thing to do.

We initially took a 95% mortgage (£175k) with a deposit of 10K and bought our house for £185,000. We’ve recently had it valued at £215,000 and so are really pleased that there *might* be some equity that we could use to pay off a loan and fund some renovations – however we’re slightly confused as to how re-mortgaging works. For arguments sake, let’s say the true value of the house was now £210,000… and we wanted to release 15k.

How would this work? My initial thinking is that we would need a new mortgage of £210,000, of which approx. £170,000 will go to repay the existing mortgage (assuming approx. 5k has been paid off over the current life of the mortgage). We’d then have our original 10K deposit in hand…Am I correct in assuming then, that we could release a further £10K and have another £20k remain as equity, effectively lowering our LTV to 90%?

But what I don’t understand here is how the deposit element would work? Would we in fact not need a mortgage of 210k but of 190k? With the 20k difference acting as our deposit, effectively lowering our LTV to just over 90%?

Sorry if this doesn’t make much sense… It doesn’t really in my head which is why I’m trying to get it on paper here.

Any help / clarification would be much appreciated.

cahillg81

Assuming the value of the property is £215k and you have a balance of £170k you have £45k equity which you can tap into.


For the vast majority of lenders they will allow you to go to 80% Loan to value for debt consolidation. There are some at 75%, some at 85% and 2 or 3 I can think of at 90%.

So on 80% LTV you can take out £172,000 which is going to give you £2000 for your home improvements and debt consolidation.

A9TNX

Thanks That's really helpful. Although - Assuming you meant £20,000 as opposed to £2,000 in your last paragraph... Unless I've mis-understood?


Thanks again

Thrugelmir

A9TNX wrote: »

Thanks That's really helpful. Although - Assuming you meant £20,000 as opposed to £2,000 in your last paragraph... Unless I've mis-understood?

You will need to seek out the lenders that offer remortgaging for debt consolidation/home improvement at higher LTV levels than 80%. A broker might be your best port of call. As your overall financial circumstances will be a consideration in which lender is best placed to meet your needs.

kingstreet

A9TNX wrote: »

Thanks That's really helpful. Although - Assuming you meant £20,000 as opposed to £2,000 in your last paragraph... Unless I've mis-understood?

You have.

£2,000 was correct.

If your property is worth £210,000 an 85% debt consolidation remortgage will see you able to borrow £178,500 from which your existing mortgage is repaid.

Obtain a settlement figure from your lender and take that off £178,500 and see what you'll have left.