Additional borrowing on Interest Only basis ??

JWxxx

Hi, 
I’m about to remortgage, what I’d like to know is, do lenders offer additional borrowing on an interest only basis ?

I currently have a £45k mortgage (interest only) plus £20k additional borrowing (repayment).

I want to borrow an additional £35k.

What I’d really like is to have the whole 100k on Interest Only.

Will the Building Society agree to this , or will they say the additional amount has to be on a repayment basis?

My house is worth £330,000, I’m 56, wife is 50, joint income £48000.

Reason for Interest Only preference is because we intend to downsize in 5 - 10 years and we’d rather have more money to spend each month .

ps, I’ve actually got a phone appointment booked this afternoon with my current lender so I’ll let you all know how goes.

Thanks.

Hoenir

Interest only is no longer mainstream following the events of the GFC. Criteria is generally extremely tight. What's the purpose of the additional borrowing ? That'll be a major influence in itself. 

JWxxx

Hi, it’s for debt consolidation.
over the last couple of years I’ve spent a lot on the house and bought a car. This debt is currently sitting on several credit card ( all on 0% btw)

kingstreet

With most lenders your remaining equity and income is insufficient for interest-only. If you are remaining with the same lender, only they can tell you their policy.

Halifax, for example;-

Sale of mortgaged property

There is a minimum income requirement for this repayment plan to be available:

• Sole applicant with an income of £75,000 or more
• Joint applicants where one applicant has an income of £75,000 or more, or where the combined income of both applicants is £100,000 or more. e.g. this could be £60k and £40k, therefore no applicant has an income of £75,000 or more but together their income is £100,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers

There is a minimum credit score requirement for this repayment plan to be available. If applications do not meet this an alternative repayment plan would need to be selected.

The amount of this repayment vehicle which can be used is assessed by:

• The equity amount available in the property being mortgaged can be used to support Interest Only lending
• This will be calculated using the valuation/property assessment carried out as part of the application and any existing or new additional borrowing elsewhere to be secured against the property must be declared and will reduce the equity amount available
• If the property is to be a main residence there must be a minimum equity amount available. The equity amount is calculated as the property value minus interest only amount:
• Up to 50% interest only the minimum equity requirement will be £300,000
• For >50%-60% the minimum equity will be £500,000
• For >60%-75% the minimum equity will be £750,000

JWxxx

That sounds quite harsh Kingstreet. 

Even with 100k on interest only that still leaves 230k equity, you would have thought lenders would be ok with that?

I’ve always had an interest only mortgage btw.

i do have a feeling though that I’ll be lucky to be offered the 100k on interest only, I’m thinking it will be much more likely that I come away with the original £45k on interest only and my existing borrowings on repayment.

but hey, could be worse.

JWxxx

Sorry I meant additional borrowings on repayment.

JWxxx

Just to update this story, I was told by my lender that I can’t have additional borrowing on an interest only basis because it’s to consolidate debt .

ACG

This can probably be placed. But I think (and this will sound like I am being judgemental but it is not meant to)...
On paper you took out an interest only mortgage, you took out a top up and now you want another top up. 
The equity in your house will be around £130-140k by the looks of it, which will be enough to buy for cash in some areas. 

But despite your mortgage being comparitively low for your income and partially on interest only you are still doing another further advance.  

On paper, I have to be honest it does not look great. Add in the context of the debt being home improvements and a car it makes things better but as a broker I would not feel comfortable doing this. 

Speak to a broker (not me haha), you might get what you are after. 

Hoenir

JWxxx said:

Even with 100k on interest only that still leaves 230k equity, you would have thought lenders would be ok with that?

Mortgage lending is a low margin activity. When mortgage accounts become delinquent the micro level of administration required is costly and disportionate. Better business model for the mainstream lenders to set a high bar.