Remortgage and Homeowner Loan

Ally00

Hi!

Would appreciate some advice if possible!

Our house is worth approx £260K we have a mortage outstanding of £120K, we're looking to re-mortgage and would like to borrow an additional 10K to pay of credit cards etc. I've been told by two mortgage companies that they are no longer able to add the extra 10K to the mortgage but you have to take it out as a separate homeowner loan. is this true for all mortgage providers? In the past we have been able to borrow additional money on our mortgage without any problems - why has this changed????

Thanks in advance for your thoughts.....

homer_j_3

When you say that you are looking to remortgage, do you mean that you were looking to refinance the whole 120k and add 10k on top of this OR

do you mean that you wish to keep the 120k with you current lender but wish to raise an extra 10k?

If its the first then that is a remortgage if its the latter then you are looking for a further advance.

Remortgage should be no issue providing income, property, credit history can support the debt.

If you are looking for a further advance, you have to approach your current lender or you have to get a 2nd charge loan, which is what you are referring to as a homeowner loan.

Normal banks and lenders will want first charge on your property and with your current lender already taking that spot, they will not want to know.

Hope that helps you understand and provide us with an accurate response to what you are actually wanting to do.

If you have approached your current lender and they have declined then you will have to remortgage fully or take a 2nd charge loan out.

Ally00

Hi homer_J

Thank you very much for your reply.

It is the 1st option you outline - I would like to refinance the whole 120K and add the 10K on top. However the 2 mortgage providers I have so far approached say they are only able to remortgage the current mortgage of 120K and not the 130K. As you say I can't see what the problem is if, as you say, income, property,credit history can support the debt - all of these issues we can satisfy.

They claim its something to do with the department of work and pensions only paying interest if you fall on hard times?????? Any idea what they are on about?

Mandark

Did they not try and sign you up to, or tell you to get, a redundancy/accident policy to cover the additional 10k?

Tiddler_2

Seems a strange decision to me, which lenders were they?

UK007BullDog

Very strange, actually quite dodgy.

If you are tied in with your present lender you might incur a charge if you remortgage away from your lender.

Those home owner loans can be quite evil, they tend to tie you in for a long time and if you want to pay them off they chave whopping fees. So make sure you read all of the small print and take your time. Dont let them steamroller you into anything. See if you can get a personal loan, might be better as it is not secured on your proeprty and you might get a resonable rate as well.

Alternatively try to move your credit card debts to cheaper cards or even o% credit cards.

homer_j_3

Ally00 wrote: »

Hi homer_J

Thank you very much for your reply.

It is the 1st option you outline - I would like to refinance the whole 120K and add the 10K on top. However the 2 mortgage providers I have so far approached say they are only able to remortgage the current mortgage of 120K and not the 130K. As you say I can't see what the problem is if, as you say, income, property,credit history can support the debt - all of these issues we can satisfy.

They claim its something to do with the department of work and pensions only paying interest if you fall on hard times?????? Any idea what they are on about?

Does sound strange. How long have you been with your current lender?

http://www.jobcentreplus.gov.uk/JCP/Partners/Allowancesandbenefits/Dev_010056.xml.html

This tells you about current regulation.

If you had your current mortgage in 1995 then the following may apply:

If you took out your mortgage after 2 October 1995, payments normally won't start until 39 weeks after you claim. How ever, you may get payments sooner if:

you got your mortgage before 2 October 1995
you are a carer and the person you look after is eligible for certain benefits
you are a single parent whose partner has died or left
you are an offender and are waiting for a trial or sentence
your have mortgage protection insurance but it won't pay because of a medical condition you already had when you took out the insurance
your mortgage replaces a previous mortgage on the same property, which was taken out with the same lender on or before 2 October 1995
If you are in one of these situations, you will probably be eligible for no interest at all for the first 8 weeks, half of the interest for the next 18 weeks, and all of the interest after 26 weeks. You will have to pay for any interest that is not covered from any income or savings you may have.

That is the only thing that I can think of but still it shouldn't mean that you cannot get a remortgage but you just need to understand that this is a "benefit" you may give up if you have to ever claim on this.

Clearly, I cannot see from what you have said why you are being told what you are and all I can suggest is that you may want to speak to a decent broker who will be able to explain things to the point you fully understand everything.

Ally00

A very big thanks to all you who responded to my post - all really helpful and I'm glad I'm not the only one who thinks its a bit strange!

In answer to some of your questions:

Did they not try and sign you up to, or tell you to get, a redundancy/accident policy to cover the additional 10k? - No - wasn't even mentioned in the conversation

which lenders were they? - I approached my current lender first who is B'ham Midshires and then HSBC

Those home owner loans can be quite evil - totally agree with you and even the lender said a personal loan may be a better option.

How long have you been with your current lender? - 3 years +

Thanks once again for all your replies. I would be interested to hear if anyone else has experienced this - especially if they've recently remortgaged to either BM or HSBC. Does anyone know a re-mortgage provider who doesn't insist on this arrangement?

Trying_really_hard

From my experience with HSBC, they said to me that the original home purchase loan and any other home owner loan had to be kept separate.

It was to do with Income Support Mortgage Interest only being payable on the home purchase loan and not any on home owner loans for debt consolidation/home improvements (which aren't to keep the property habitable). That was the reason I was given anyway. Rather annoying as it means 2 Direct Debits (or more possibly).

Ally00

Trying_Really_Hard - thank you very much you explained it brilliantly! I now understand what they were on about.