About To Remortgage For The First Time and I Have A Few Questions

Richie_C

OK. We got our first house 3 years ago for the price of £123,000 with 10& deposit. We took out a 35 year mortgage at 4.29% with Nationwide.

Now at the moment the best rate I've found is to stick with Nationwide and get a rate of 1.84% no fees at all and £250 (which is nice but not the reason for choosing them).

Now when we remortgage we will have about £107,000 left to pay or a little bit less. Based on some online calculators it says that out house is now worth between £139,000 - £142,000.

This means out LVT will be between 75.35% and 76.60%.

From looking online this means that we will have to have an 80% LVT mortgage.

Now the part im confused about is that our mortgage advisor said that if we got an 80% mortgage but out LVT was actually say 76% we would be given the difference in the two price as cash, which could then spend on lets some so need home improvements.

Is this correct or do I have it wrapped around my neck?

To me:

80% of £142,000 is £113,600
75.53% (which is our LVT) of £142,00 would be £107,252
Which makes a difference of £6348.

TheShape

Your loan to value (LTV) is below 80% which means you can take advantage of deals that require a max LTV of 80%.

You do not need to borrow at 80% LTV. You could borrow £113k and still get the deals applicable to a max LTV of 80%, but do you need/want to do this? You only need to borrow £107k but it sounds like someone is trying to convince you to borrow more money.

Richie_C

Hi TheShape, thanks for replying.

The reason we are thinking about borrowing the maxium 80% would be to have the cash for home improvements mainly repairing rendering on the house and to have a new bathroom (the bathroom is not far from falling to bits), we were going to take a loan out but if we can borrow £113k instead of £107 and still shorten our mortgage term and pay what we pay now a month due to have a lot lower interest rate it seems like the best option over a loan and having to pay back £100+ a month.

ThePants999

Yup, very true. If you'd need to borrow money anyway, and have the opportunity to borrow it at mortgage interest rates, sounds like a good idea to me.

Remember, "re-mortgage" is a shorthand for paying off one mortgage and getting a replacement one at the same time. The new one can be for more or less than the old one. If it's for less, you'd need to have lodged the difference with the solicitor that's handling things for the bank. If it's for more, they'll send you the difference.

TheShape

Richie_C wrote: »

Now the part im confused about is that our mortgage advisor said that if we got an 80% mortgage but out LVT was actually say 76% we would be given the difference in the two price as cash, which could then spend on lets some so need home improvements.

This section made it sound like the mortgage adviser was trying to convince you to borrow extra as you hadn't mentioned home improvements earlier in your post.

If you want to make some home improvements then mortgage borrowing is usually the cheapest way to borrow (although we don't know what interest rates might do in future) so why not.

If you're thinking of reducing your term read this from Martins blog first:

http://blog.moneysavingexpert.com/2014/10/09/dont-shorten-your-mortgage-term-if-you-can-overpay/?_ga=1.21673851.175998010.1485217757