Options for additional lending to extend house

rob7475
rob7475 Posts: 835
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edited 8 December 2023 at 9:51AM in Mortgages & endowments
Hi,

I am looking for a bit of advice / opinion on my options for taking an additional loan from my mortgage provider to allow us to extend into the loft of our house and add a dormer.

Bit of background:

Mortgage is with Accord Mortgages and has been since 2005 with no issues. We currently owe about 50k and mortgage will be paid off by 2030. Our mortgages costs £700 per month. We have 2 parts to the mortgage, both on capital and interest. main part which is about 35k is on 2.2% fixed until 2030. 2nd part is on 1.8% fixed until 2026. Current house value is around £240k, maybe more so we have a low LTV.

We are looking to borrow an extra £55k to allow us to extend into the loft and add a dormer with ensuite. Our plan is to borrow the extra on an interest only basis over 15 years which would cost around £230 per month which is affordable to us. When the two main parts of the mortgage are cleared in 2030, that would then give us 8 years of using the £700 per month to clear the £55k capital on the additional loan.

At the end of the 15 year term, I will be 57 so would also be able to access 25% of my pension pot (currently £60k) should there be any shortfall.

Does this plan sound reasonable and would a lender find this an acceptable plan to pay back the interest only portion of the mortgage. We have been with the same lender since we bought our first house in 2005 and even with the additional loan, the LTV would be well under 50%.

Thanks

Comments

  • ACG
    ACG Posts: 23,611
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    There are lenders who would be ok with that I think. 
    I am not sure about Accord, although in the back of my mind I feel like they are one of the easier lenders to deal with on interest only. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • MWT
    MWT Posts: 9,107
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    edited 8 December 2023 at 9:56AM
    From a quick glance at Accord it looks like the only tricky bit might be the 'repayment vehicle' as the plan as outlined doesn't fit in with their acceptable list (as long as 15 years doesn't take the borrowers into retirement)....
    With the existing fixed rate components on the current mortgage it would be expensive to even contemplate going elsewhere so has to be worth talking to Accord as an existing customer I'd have thought?
  • rob7475
    rob7475 Posts: 835
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    MWT said:
    From a quick glance at Accord it looks like the only tricky bit might be the 'repayment vehicle' as the plan as outlined doesn't fit in with their acceptable list (as long as 15 years doesn't take the borrowers into retirement)....
    With the existing fixed rate components on the current mortgage it would be expensive to even contemplate going elsewhere so has to be worth talking to Accord as an existing customer I'd have thought?
    Thanks, I've had a look at their criteria for interest only and it does worry me a bit that they may not accept my plan for repaying the capital. I'm hoping that their underwriters will actually listen to our plan as I don't think it's unreasonable. Once our initial mortgage is cleared in 2030, I would have 8 years to save the 55k so would need to put away £572 per month which doesn't take into account any interest we may get on the savings. This is £130 per month less that we pay on the current mortgage so is easily affordable. As a backup, I can take 25% of my pension pot which I would hope would cover a good chunk of the 55k and as a worse case, there is enough equity in the house that we could downsize if needed.
  • MWT
    MWT Posts: 9,107
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    edited 8 December 2023 at 12:19PM
    rob7475 said:
    As a backup, I can take 25% of my pension pot which I would hope would cover a good chunk of the 55k and as a worse case, there is enough equity in the house that we could downsize if needed.
    They will not accept the pension lump sum, but perhaps you best approach is to present it exactly as you have worded it here, so you intend to repay the mortgage in full before the term ends from normal income but...
    "As a backup, there is enough equity in the house that we could downsize if needed."




  • housebuyer143
    housebuyer143 Posts: 3,155
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    edited 8 December 2023 at 2:04PM
    rob7475 said:
    Hi,

    I am looking for a bit of advice / opinion on my options for taking an additional loan from my mortgage provider to allow us to extend into the loft of our house and add a dormer.

    Bit of background:

    Mortgage is with Accord Mortgages and has been since 2005 with no issues. We currently owe about 50k and mortgage will be paid off by 2030. Our mortgages costs £700 per month. We have 2 parts to the mortgage, both on capital and interest. main part which is about 35k is on 2.2% fixed until 2030. 2nd part is on 1.8% fixed until 2026. Current house value is around £240k, maybe more so we have a low LTV.

    We are looking to borrow an extra £55k to allow us to extend into the loft and add a dormer with ensuite. Our plan is to borrow the extra on an interest only basis over 15 years which would cost around £230 per month which is affordable to us. When the two main parts of the mortgage are cleared in 2030, that would then give us 8 years of using the £700 per month to clear the £55k capital on the additional loan.

    At the end of the 15 year term, I will be 57 so would also be able to access 25% of my pension pot (currently £60k) should there be any shortfall.

    Does this plan sound reasonable and would a lender find this an acceptable plan to pay back the interest only portion of the mortgage. We have been with the same lender since we bought our first house in 2005 and even with the additional loan, the LTV would be well under 50%.

    Thanks
    You can't get interest only with accord because the house value is too low to use as a repayment vehicle, unless you have another way? 
    The underwriters will not deviate from the lending criteria, they will just refuse to accept the application on interest only. 
  • rob7475
    rob7475 Posts: 835
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    rob7475 said:
    Hi,

    I am looking for a bit of advice / opinion on my options for taking an additional loan from my mortgage provider to allow us to extend into the loft of our house and add a dormer.

    Bit of background:

    Mortgage is with Accord Mortgages and has been since 2005 with no issues. We currently owe about 50k and mortgage will be paid off by 2030. Our mortgages costs £700 per month. We have 2 parts to the mortgage, both on capital and interest. main part which is about 35k is on 2.2% fixed until 2030. 2nd part is on 1.8% fixed until 2026. Current house value is around £240k, maybe more so we have a low LTV.

    We are looking to borrow an extra £55k to allow us to extend into the loft and add a dormer with ensuite. Our plan is to borrow the extra on an interest only basis over 15 years which would cost around £230 per month which is affordable to us. When the two main parts of the mortgage are cleared in 2030, that would then give us 8 years of using the £700 per month to clear the £55k capital on the additional loan.

    At the end of the 15 year term, I will be 57 so would also be able to access 25% of my pension pot (currently £60k) should there be any shortfall.

    Does this plan sound reasonable and would a lender find this an acceptable plan to pay back the interest only portion of the mortgage. We have been with the same lender since we bought our first house in 2005 and even with the additional loan, the LTV would be well under 50%.

    Thanks
    You can't get interest only with accord because the house value is too low to use as a repayment vehicle, unless you have another way? 
    The underwriters will not deviate from the lending criteria, they will just refuse to accept the application on interest only. 
    Ok - not what I wanted to hear but thanks anyway. 

    I take it you have dealt with Accord then?
  • housebuyer143
    housebuyer143 Posts: 3,155
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    edited 8 December 2023 at 9:06PM
    rob7475 said:
    rob7475 said:
    Hi,

    I am looking for a bit of advice / opinion on my options for taking an additional loan from my mortgage provider to allow us to extend into the loft of our house and add a dormer.

    Bit of background:

    Mortgage is with Accord Mortgages and has been since 2005 with no issues. We currently owe about 50k and mortgage will be paid off by 2030. Our mortgages costs £700 per month. We have 2 parts to the mortgage, both on capital and interest. main part which is about 35k is on 2.2% fixed until 2030. 2nd part is on 1.8% fixed until 2026. Current house value is around £240k, maybe more so we have a low LTV.

    We are looking to borrow an extra £55k to allow us to extend into the loft and add a dormer with ensuite. Our plan is to borrow the extra on an interest only basis over 15 years which would cost around £230 per month which is affordable to us. When the two main parts of the mortgage are cleared in 2030, that would then give us 8 years of using the £700 per month to clear the £55k capital on the additional loan.

    At the end of the 15 year term, I will be 57 so would also be able to access 25% of my pension pot (currently £60k) should there be any shortfall.

    Does this plan sound reasonable and would a lender find this an acceptable plan to pay back the interest only portion of the mortgage. We have been with the same lender since we bought our first house in 2005 and even with the additional loan, the LTV would be well under 50%.

    Thanks
    You can't get interest only with accord because the house value is too low to use as a repayment vehicle, unless you have another way? 
    The underwriters will not deviate from the lending criteria, they will just refuse to accept the application on interest only. 
    Ok - not what I wanted to hear but thanks anyway. 

    I take it you have dealt with Accord then?
    Yes, I am with YBS who own accord, their lending criteria is the same. 
    We have interest only, and they specifically ask you which repayment method you are using at application. If you don't have one from the list they will not continue. 
    We are using sale of property as a repayment vehicle and you must have at least £250k equity in the property to qualify AND be able to downsize (on the deposit you put in) to a suitable property locally. 
  • dwsjarcmcd
    dwsjarcmcd Posts: 1,855
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    Could you extend the additional loan to 25 years on a repayment mortgage.  This would allow you to retain the rates you have and start to repay a bit of the capital on the additional loan.  When you repay the 2030 loans, you can then overpay the new additional loan to bring the term down.

    Appreciate this will cost more and will obviously be down to affordability but could be an option to consider.
  • rob7475
    rob7475 Posts: 835
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    Could you extend the additional loan to 25 years on a repayment mortgage.  This would allow you to retain the rates you have and start to repay a bit of the capital on the additional loan.  When you repay the 2030 loans, you can then overpay the new additional loan to bring the term down.

    Appreciate this will cost more and will obviously be down to affordability but could be an option to consider.
    That's an alternative option if they won't entertain the interest only idea. If I borrow 70k, I can clear the second part of my mortgage (15k) which costs me just under £200 per month. I would then take the 70k over 25 year at an initial cost of £430 a month which works out the same as if I took the 55k as interest only. The only downside to this option is I would lose the 3 years remaining fixed rate of 1.89% on 15k and have to pay an early settlement fee of around £600.
  • rob7475
    rob7475 Posts: 835
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    Just as an update to this....

    e decided to extend the term of our current mortgage from 7 years to 15 years and also take the additional lending over 15 years which keeps everything affordable.

    I spoke to Accord yesterday and they spent about an hour running through our income / expenditure and debts etc before confirming that affordability is fine and also agreeing that extending the term of the existing mortgage wouldn't be an issue and there affordability checks would allow us to borrow a good bit more than the 55k we need if we required it. They have now booked me in for a call with one of their mortgage advisors next week to go through monthly payments and make sure we are happy with everything.

    However, after the person I spoke to yesterday and run through all the questions and said the loan was affordable, he mentioned that in our case they could process it as a paperless application and they wouldn't need to send any forms out for us to sign. Has anyone else experienced this with Accord? I'm assuming they'd still need to see proof of income and bank statements at least?
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