Can we borrow cash on top of mortgage?

Caroline_83

Hello!

Currently house hunting as a first time buying and finding it all very stressful. BUT it’s all part of the experience I guess. Haha.

Just a quick question....

When we take out a mortgage, can we borrow a lump sum of cash in addition so that we may spruce the place up?

For example, we are interested in a house that we could possible get for £175k. We have a £20k deposit and so would need to only borrow £155k BUT would the mortgage lender allow us to borrow £165k so we have £10K to re-render etc?

Thanks in advance.

kingstreet

No. You would simply reduce your deposit.

glosoli

You would just put down a £10,000 deposit and apply for a 95% mortgage.

Caroline_83

I see. A colleague of mine managed to do this a few years ago. Maybe things have changed?

And would reducing our deposit make a difference to the lending agreement like the interest rates or anything?

TrickyDicky101

Caroline_83 wrote: »

And would reducing our deposit make a difference to the lending agreement like the interest rates or anything?

It may reduce your pool of potential lenders and could well lead to a higher interest rate on the borrowing.

If you are using a broker, this is what (s)he should be advising?

Neutrinno

Caroline_83 wrote: »

I see. A colleague of mine managed to do this a few years ago. Maybe things have changed?

And would reducing our deposit make a difference to the lending agreement like the interest rates or anything?

If that was the case then things have definitely changed.

Yes the rates would be higher compared to a larger deposit (10%+) and you would be treated as a higher risk to the lender when applying.

Caroline_83

So would it be best to stick with putting down our £20k deposit? To save money in the long term?

mostlynice

Caroline_83 wrote: »

I see. A colleague of mine managed to do this a few years ago. Maybe things have changed?

This was the main reason Northern Rock found itself in the touble it fell in, letting people have 110/115/120% mortgages

clairebeth

Your colleague may have been remortgaging rather than being a first time buyer with a cash deposit? They may have, for instance, released equity they already had in the property?

Put the £20k deposit down. Buy your furrnitire second hand or in the bargain corner at IKEA. Pay for home improvements as and when you can.

enthusiasticsaver

Just before sub prime crisis in 2008 foolish lenders like northern rock were doing daft things like lending 120% mortgages. Some of those borrowers are still in negative equity now and locked into bad rates.

You are best off putting the highest deposit you can down to secure low mortgage rate. Save up for home improvements or use 0% credit card if affordable. Second hand furniture or diy if you are competent for improvements.