Mortgage Query!

misslocke

Hello All!

This is my very first post on my favourite site!

My query is about my mortgage!

Me and my partner are a young couple and bought our first home in June 2007 for £105,000. My partner earns about £26,000 gross and I earn £16,500 gross. We needed a mortgage that would give us extra money to improve the property. We have no loans... etc

The house is a two bedroomed terr property, and needed to be compleatly updated. We have extended the kitchen and added a third bedroom in the attic. After renovating the property it should be worth approx £150,000 (based on house prices in the area)

Alliance and Leicester gave us a £105,000 mortgage and were also offering at the time to give a maximum loan of £25,000 to make improvments to the property. So we took this out and used £5250 of the loan to put a 5% deposit on the mortgage. We are currently on a fixed Rate of 6.5% until June 2009 paying £850 a month.

Total mortgage: £124,750

In June 2009 our fixed rate will finish and go up to approx 7.5%.

We have completely gutted the property from top to bottom and hope to have it finished by Jan / Feb 2009. We will be needing between £15,000 and £20,000 extra to finish the property. We have got relatives that will lend us the money.

If we did lend money from relatives over the next few months, how could we add this amount to our mortgage when it is due and pay our relatives back what we owe!

In June 2009 we were hoping on finding a better mortgage deal (as 7.5% is a very high). Hopefully one were we will be able to make overpayments each month to get it paid as quickly as possible.

Please reply as me and my partner are starting to panic with money worries!
Thank you in advance!

homer_j_3

If your property is worth 150k when you have done everything and have another 15-20k spending then you are taking your debt upto 140-145k. As you would just get the lending based on the value of your property, you may be lucky to get a way with a 95% mortgage.

This to me is a high risk as you will be struggling to get a mortgage with only 5k equity in it, if you dont overspend and use the 20k rather than 15k.

Add to the fact that house prices may not be what they are now and that you are borrowing the such a high level - the risk to your families money is quite risky.

Depending on what needs doing now, I would probably take a view of whether its worth the risk.

misslocke

Thank you for your reply!

The £19750 loan that we have already had will not be enough to finish the property. What we have left should get all plastering done, pay for electrician and plumber. We still need new Kitchen, Bathroom, two flights of stairs etc. As this is our first home we will also be needing essentials like, washing machine, tumble dryer, cooker, fridge, microwave, table, bed, sofa etc

If we do go ahead with the £15,000 extra we can finish the improvments. We can then move in, and all rental costs to parents, we will pay on top of our mortgage!

We plan to stay in the property! My partner is spending each evening and weekend working on the house himself. So a lot of work is going into it!

natman

This to me is a high risk as you will be struggling to get a mortgage with only 5k equity in it, if you dont overspend and use the 20k rather than 15k.

Add to the fact that house prices may not be what they are now and that you are borrowing the such a high level - the risk to your families money is quite risky.


I agree with Homer J -
I can really understand the passion you may have with the house and wanting eveyrthing perfect and complete, but at present the housing market is all over the place.
I have friends in a similar position, they borrowed money to doo up the house etc, and their fixed rate deal is coming to an end and even though, they are both working, and dont have othe debts( credit cards) they are struggling.
They purchased the house for £120,000, and added on £15, 000 - total £135,000. initially they tried to remortgage with another lender, a valuation was done and it came back at £130,000, so the new lender would only lend them that ( £5000 less than needed)
They are mulling over whether to keep with the existing company on a higher monthly payment rate - i.e the standard variable 7.24% or borrowing £5,000 as an unsecured loan, to get a better deal with a new lender.

The good thing is, you can plan for this, and be very careful, i would ask does everything need to be done in the house now - can some things wait

misslocke

Thanks for your reply Natman much appreciated!

What you are saying does make perfect sense! But if we dont get more money the house will not be finished! :-(

Would it be better to put £10,000 on our mortgage and then borrow between £5-10,000 from our relatives and pay them back each month seperate from our mortgage as this is also an option!

natman

Hi.

Your a devil..........arnt you no matter what anyone says you defo want to move into the house and do it all up, sounds like a dream, i would just hate the dream to turn into a nightmare.

I would say do not rely on your property to financially support you or the loans - i.e it might actually lose money when it comes to chosing a new mortgage product, and you may, like alot of people might have to think about giving it up. :rolleyes:

what i might do is prioritise what rooms are needed to move in - lounge, kitchen, bedroom and bathroom. all teh other rooms, hallway, landing, second bedroom, could wait, like i said i am not sure of your situation.
Once i prioritised, if i could get some lans from family which could pay back interest free, i would look at that, i may also look at a 0% credit card for 12 month.
either way i knwo that you want to make your home a castle and it sounds as though you are not doing it to make money, so i would not risk your finances for the effort your putting in.Hope this makes sense.

Sorry if you have already prioritised, but just talking you through my thought process. at the minute i suppose your in control of what you do.
in 12 months you dont want to look back and wished you had slowed it down, if you can do.

Good luck!!!!!!!!!!!:A

misslocke

Thanks for your reply

We have decided to cut back - and only buy essentials for the house! Finish plastering, put stairs in, need kitchen + bathroom, Electician, Plumber

Going to leave the two bedrooms for the time being - and just do up our main bedroom!

Will look into a credit card! Not keen on them things though - never had one myself!!!

And we are going to try to borrow all the money we need from relatives! And try to save as much as we can ourselves!

natman

Hi Miss locke.
It sounds as though you have reflected and decided to cut back, and only carry out the work on the essentials.
I know its easy for me to say, but hopefully a good decision.

Also I have the thoughts of you only live once, just make sure, even though you are cutting back at the minute, you get it done soon!!!!!

Good luck