How Secured Loans Affect LTV% Of Remortgage

jedimonkey

Hi all,
We bought our house 18months ago for £147,000. Our rate ends soon and I would be looking for a better deal. We took out a secured loan to renovate downstairs inc new kitchen with the intention of adding the amount to the next mortgage we took out.

STILL OWING:
Northern Rock Mortgage (4.45%) - 139,750 (end March)
Northern Rock Secured Loan (7%ish) - £12,475 (inc fees)
Total in march for redemption according to Northern Rock is £152,225

Now, Ive just obtained our credit file and it doesnt mention the secured loan, only that the total owing for the mortgage is: £152 225

I was unsure if the new lender would make calculations based on the mortgage value owing (139,750) on the basis we cleared the secured loan, or if they would calculate based on the total owing (152,225)

My reason is:
if the house is worth 170k - and they base it on 152,225 - my LTV is 89%
BUT
If the house is worth 170k - and they base it on 139,750 - my LTV is 82% - i could juggle some cash to get LTV to 80% and get the FD 4.99% fixed rate for 5/10 years......

Any thought/answer/questions welcomed.
thanks,
JM

jedimonkey

*bump*

Anyone offer any advice on this one?? :money:

silvercar

The new lender will base it on the amount you are asking to borrow. If you want to transfer the loan and the mortgage to the new lender it will be the higher amount. If you want to leave the loan with NR and the mortgage moved to the new lender it will be the lower amount.

chappers

It wouldn't make any difference unless you could clear the unsecured loan.
I doubt they would offer you the £139,750 as an 82% LTV until you had cleared the loan, as it is secured on the property and if you didn't clear it the value they would be lending against would be £157,525 (£170,000-12,475) which would be the same LTV as you mentioned 89%.
I may be wrong on this and I'm sure someone will be along who is in abetter position to advise you.

mortgagemark_2

Hi,

Was the loan actually secured on your property or did you take a Together product of 100% + with Northern Rock ? If so the smaller anount will not be secured on the property.

If so, you could leave the unsecured loan with Northern Rock BUT BEWARE the rate will increase significantly from the rate now so not a good idea so you will need to borrow the total of the two loans to move to another lender to be cost effective.

So look for a remortgage for £152,225.

Also bear in mind your property may be downvalued if the lender takes the easy route of doing a "drive by" or "Automated Valuation" ie. not physically visiting the property and even if they send a lovely valuer around he may well downvalue anyway as they always do on remortgages (IMO).

chappers

Don't know your current situation with regards to affordability but if your NR loan is unsecured any new lender may ask you to promise to clear that loan.

jedimonkey

Thanks for the info guys. Im pretty sure the loan was secured on the property - i will be calling NR soon to double-check - but Im almost positive it was - so i think the remort for 152k would be the only option.

Time to get the calculator out then i guess !!!!!
Thanks again
JM