Need to raise funds

brickman0430

Hi all, i'm new here so please bear with me. I bought my house approx ten years ago with my girlfriend, our mortgage is £46,000, at the moment the house is worth about £150-£165,000, my question is, what is the best way to release the equity in the property? re-mortgage or secured loan? we need to do quite a bit of work to the house, new kitchen, bathroom, garage roof etc, which should put another £20-£30,000 on the value. This might sound an easy question to answer, but it's complicated by the fact that i have a bad credit record and am self-employed, although my girlfriend's record is spotless and she works full time, would we be better off putting the property in her name only? Thanks in advance for any help,
Paddy.

brickman0430

Anyone out there who can advise?

AndrewSmith

brickman0430 wrote: »

Hi all, i'm new here so please bear with me. I bought my house approx ten years ago with my girlfriend, our mortgage is £46,000, at the moment the house is worth about £150-£165,000, my question is, what is the best way to release the equity in the property? re-mortgage or secured loan? we need to do quite a bit of work to the house, new kitchen, bathroom, garage roof etc, which should put another £20-£30,000 on the value. This might sound an easy question to answer, but it's complicated by the fact that i have a bad credit record and am self-employed, although my girlfriend's record is spotless and she works full time, would we be better off putting the property in her name only? Thanks in advance for any help,
Paddy.

Hi Paddy,

The usual answer to this would be to raise the extra capital by way of remortgage, as the interest rates would be significantly lower than using a second charge (secured loan) especially with the relatively low mortgage amount vs property value (loan to value percentage).

However it will depend on a number of things.

• Who is your current lender and what rate are you on?
• Have you asked your current lender about raising the extra cash?
• What is the extent of the bad credit you have and is it all cleared now?
• How long have you been self employed and what level of income do you draw?
• How much do you want to raise?

The type of issues you may face are that if you are on a good rate with your current lender, or they give you the option to simply product switch without a new application, you may be as well to do that and take a secured loan for the extra element instead of taking a complete new re-mortgage which may be at a higher rate than you are currently on owing to your bad credit history.

Re: putting the property in the name of your girlfriend. This would involve a 'transfer of equity' and involve a solicitor and legal costs. Also she would still have to declare you as living at the property and that she has a 'financial association' with you which means that your bad credit history could still affect the rate she is able to get.

I'm afraid that there is no simple answer to this without knowing much more about the situation as a whole.

Thanks

Andrew

brickman0430

Thanks for the reply, our mortgage is with Barclays, the interest rate was 7.39% as of March of this year, we have never missed a payment. There is however a twist, the mortgage is an endowment, but after we had been in the house for about 3 years, we noticed that Barclays had never taken the money from our bank account for the endowment part of the mortgage, only the interest part, i know we should have done something about it at the time, but we let it slip, and to this day we only pay the interest, which now is approx £290 a month, we had always intended selling the house before the mortgage became due, and changing to a repayment type, so, we are a little scared to ask Barclays to increase the mortgage, in case they want the back-payments for the endowment. Should we simply approach another lender and try to get a repayment mortgage?

AndrewSmith

They will not want the back payments for the endowment. If they haven't taken the money for it then the endowment will not exist.

Approach them first, it is vital that you do so. See what they have then come back and let me know what they have come up with.

Thanks

Andrew

brickman0430

Ok thanks Andrew, but surely if the endowment does'nt exist, then the mortgage is null and void, i mean, supposing we stay in the property for the twenty five years of the mortgage, then what? how would it get paid off? thinking about it, i seem to remember they took the first payment for the endowment but then stopped taking any further payments, so the endowment must have existed at one time. I must admit if i approach Barclays now, they might deem the mortgage to be void and snatch the house back.

AndrewSmith

No they will not.

The mortgage and the endowment are two separate elements completely and have no bearing on each other at all.

You have kept to your agreement with the mortgage as you have made the interest payments under the conditions of the mortgage offer.

The endowment is merely a life insurance policy with an investment element. If the payments to it stop then (subject to T&C's) so does the cover of the policy.

You need to check this as you may find that you have no life cover protecting the mortgage as well.

I can catagorically assure you that Barclays will impose no penalty at all for the endowment not being in place. Repayment of the mortgage at the end of the term is the responsibility of the borrower. The mortgage company are happy as long as the interest is paid on time and up to date.

They will certainly not deem the mortgage void and take back your house.

Call them, ask them what products they have that you can switch on to. Get them to quote you for the cost of switching to mortgage to repayment as well.

Post your findings back here for me to see.

Thanks

Andrew

brickman0430

Ok thank you once again Andrew, i'll need to fish out all the relevant documents, so it will be a day or two before i get back.

brickman0430

Just had a few thoughts while i was looking for all the documents, firstly, should i tell barclays that the endowment has never been paid, other than the first time? secondly, can they make us start a new endowment policy, bearing in mind that there is only 13 years left to run on the mortgage? and thirdly, if we switch to a repayment type mortgage, would'nt it need to start again as a 25 year mortgage? ideally we want to borrow around about 80k, which is roughly half the value of the house. please excuse my ignorance of these things, i'm actually getting confused just thinking about it, but i appreciate your help so much.

AndrewSmith

Just had a few thoughts while i was looking for all the documents, firstly, should i tell barclays that the endowment has never been paid, other than the first time?

None of their business, they will not want to know.

secondly, can they make us start a new endowment policy, bearing in mind that there is only 13 years left to run on the mortgage?

No, they cannot make you take any repayment vehicle at all.

and thirdly, if we switch to a repayment type mortgage, would'nt it need to start again as a 25 year mortgage?

No, You can take the repayment mortgage over a different term, ie to fall in line with the current remaining term on your mortgage.

ideally we want to borrow around about 80k, which is roughly half the value of the house. please excuse my ignorance of these things, i'm actually getting confused just thinking about it, but i appreciate your help so much.

No problem, it's only easy if you know the answers. Ask away.

Thanks

Andrew

brickman0430

Oh boy, you are going to regret saying "ask away" lol. Anyway, when i enquire with Barclays about other products, what kind of things will they need to know? will they for instance do a credit check on us? as i said, we have never missed a payment in 12 years (incidentally, i still for the life of me can't figure out why they took the first endowment payment, then stopped)
Once again, thanks in advance,
Pat.