Releasing equity by remortgaging

TomClark85

Hi all
Sorry if this has been discussed before, but I couldn't see a post about anyone in a similar situation.
I bought my first property just over 5 years ago for £340,000.  Based on valuations and the recent sale of other neighbouring properties, I think the value is now around £420,000.  I currently have around £215,000 left to pay on my mortgage.  I was also loaned £60,000 by my family, to help me to buy the property.  My current income is around £65,000, and I'm self employed (with 4 years worth of tax returns).  Next year, when my mortgage is up for renewal, I'd like to release some funds, to pay back the money that I owe to my family.  Is that something that is possible?  I've heard about remortgaging to release money for home improvements, and also to pay off debts, but obviously £60,000 is a considerable amount.  Also, how much detail would lenders want to know when it comes to equity release, in terms of what the money is for?  It'd be great to know what my options are, so that I can begin to plan for next year.

Thanks so much

Tom

tim_london

So basic answer is yes.

You don't actually need to wait to do this when your mortgage deal end.  You can actually do a 'further advance' at any time  after 6 months you've purchase the house with the current lender, the issue is they probably will not update your property value.  By doing it as part of remortgage may make it easier and more economical because you can update the value of your house thus giving you better LTV rates.  

Quick calculation shows that if your 420k valuation holds true, without 60k further advance you'll be at 61% LTV, with the 60k advance you'll be at 65% LTV.  So it sounds like either way you won't be unlocking the lowest 60% rate so it doesn't really matter.  

TomClark85

Hi Tim,
Thanks so much for your reply - that's really helpful.  When it comes to remortgaging, would 'paying back a £60k loan' be a legitimate reason, when the lenders ask why?  Or would I put it down as 'debt consolidation'?  I'm not sure whether there are some reasons for borrowing that lenders look more favourably upon?  Also, is £60k a realistic amount to ask for, or would that in itself raise eyebrows, given the value of my property?
Thanks 
Tom

[Deleted User]

The trouble is when you bought the property you had to declare the deposit was a gift ? Or your savings ? Lenders dont generally lend if the deposit was borrowed, so a picky lender may decline if you apply to borrow and state that reason because you would have lied. However if you was upfront when you took out the mortgage and you meet the affordability on £65k a year to borrow the extra amount - should be ok.
lenders are extra picky about affordability and self employed at the mo

TomClark85

Thanks Densol, that's really helpful.  Just to check, I assume the income figure that lenders will use is after tax etc, rather than gross?

dimbo61

If you can't borrow the extra £60,000 you want from your current lender shop round to find another lender will to lend you the amount you want.

[Deleted User]

TomClark85 said: 

Thanks Densol, that's really helpful.  Just to check, I assume the income figure that lenders will use is after tax etc, rather than gross?

The amount they use is the gross income for the affordability. 
try a few online affordability calculators 
I think Nationwide’s full calculator is good, also the intermediary one on the Santander site is very good and that actually calculates net income as part of its calculations

foxy-stoat

You may find that some lenders will not allow you to remove that amount of equity to clear debt, have you called up your lender yet and asked?