Taking equity / Borrowing from Mortgage

[anonymous-user]

[redacted]

[V8mate]

Do you mean that when you took out the original mortgage the house was worth £280k?

[aaronc]

The bank will take a worst case scenario of your house, they will obviously get a lesser sale price as a repo then you would selling. Therefore your sums to me look about right.

[scottri]

I have this problem. Except i'm already at the max LTV rate (85% in my case)which means i can't have any funds to spend on the house. The only way to do it is to find the cash elsewhere, do the extension or whatever will add value, then have the house re-valued and then take the mortgage out based on the new valuation. Risky approach i think - in my case as i could end up with a load of cash on credit cards and the bank then decide to decline the additional mortgage.

The reason they wont lend based on the anticipated value was because it doesnt exist until after the work is done. Fair enough really. For all they know i could choose to spend £40k on some fancy taps.

Edited by scottri on Thursday 7th March 17:53

[Mandat]

anonymous said:

[redacted]

But based on current value of the house, you will owe £240k on £280k, which is a lot more riskier to the bank.

[aaronc]

I didn't even bother with my bank/mortgage when I did my extension as I would have been in a similar situation to you, instead I sold everything that I owned and now its all done, now Im free to spend/save again, its really the only way.

A point to note, building work always goes over budget, mine went 20% even though I was adamant it wasn't going a penny over so make sure you have enough before you start.

[mattdaniels]

anonymous said:

[redacted]

You're applying to borrow money secured against an asset. The asset is valued at 280K. Taking an additional 45K on top of your 198K mortgage gives you 243K secured against a 280K house which is 86%LTV. If your mortgage product is max 75% LTV then computer says no.

If you can only get 24K from the mortgage, you need to take out an unsecured loan for the remainder, or maybe chat to a mortgage adviser to see if there are any "home improvement" type products along the lines that self-build mortgages do, which would unlock cash in stages based on valuation of the property during the works.

[miniman]

The trouble is, they can't guarantee that you will actually build the extension, so from their point of view the house might never be worth the higher amount you mention.

[Sarnie]

mattdaniels said:

You're applying to borrow money secured against an asset. The asset is valued at 280K. Taking an additional 45K on top of your 198K mortgage gives you 243K secured against a 280K house which is 86%LTV. If your mortgage product is max 75% LTV then computer says no.

^^ This.

To the lender, the future value is irrelevant to them. As others have said; what if you go and blow the money on hookers?

It's also similar to how lenders won't lend to people who are wanting to use a bonus that will be paid to them in the future. How do they know you will definitely get it? What if the company stops all bonus??

Lenders deal with hard facts; what is the property worth now, not in the future? What bonus have you actually received, not that you think/hope/expect to receive at some point?