What I Get A Better Deal If...?

[WEHGuy]

Hi folks,

two questions really.

1.) Would I get a better deal on a mortgage if, I bought a house outright and then remortgaged it to release the equity rather than initially getting a mortgage to buy it?

2.) If I bought a house outright for say £350000, spent £50000 renovating it and then got it valued at £500k, would I be able to get a £500k mortgage?

Thanks in advance.

[craigjm]

1) no
2) no, the value given of 500k would mean that you would have to find a 100% mortgage provider to do that

[otherman]

No, because either method is just a first time mortgage. In your example one its not a remortgage because it isn't mortgaged

[WEHGuy]

craigjm said:

1) no
2) no, the value given of 500k would mean that you would have to find a 100% mortgage provider to do that

Yes, I know you can't get a 100% mortgage but would I be able to value it at £500k and take my £400k back out, leaving 20% equity in it?

[AyBee]

craigjm said:

1) no
2) no, the value given of 500k would mean that you would have to find a 100% mortgage provider to do that

2) above is correct, but the new mortgage would be based on the increased value, which I think is what you actually meant.

[WEHGuy]

AyBee said:

craigjm said:

1) no
2) no, the value given of 500k would mean that you would have to find a 100% mortgage provider to do that

2) above is correct, but the new mortgage would be based on the increased value, which I think is what you actually meant.

Yes. 80% of £500k instead of 80% of £400k.

[craigjm]

WEHGuy said:

Yes, I know you can't get a 100% mortgage but would I be able to value it at £500k and take my £400k back out, leaving 20% equity in it?

Sorry I misunderstood. In that case you probably could but may have to change lender to do so or potentially leave 25% in.

[WEHGuy]

craigjm said:

Sorry I misunderstood. In that case you probably could but may have to change lender to do so or potentially leave 25% in.

There would be no lender. I would use money from one of my companies to buy a property under value or at auction with cash, renovate it and then mortgage it to recoup my companies £400k. I want a nice house but, don't want £100k+ tied up in it.

[WEHGuy]

PS. What sort of rate can you expect for a 5 year fixed rate 80% mortgage?

[darreni]

WEHGuy said:

There would be no lender. I would use money from one of my companies to buy a property under value or at auction with cash, renovate it and then mortgage it to recoup my companies £400k. I want a nice house but, don't want £100k+ tied up in it.

So the company would own the house?

The company would then need to apply for a mortgage on it. Last i looked (& i'm a little out of touch with UK stuff), ths would mean a commercial mortgage at 60% ish LTV?

[WEHGuy]

darreni said:

WEHGuy said:

There would be no lender. I would use money from one of my companies to buy a property under value or at auction with cash, renovate it and then mortgage it to recoup my companies £400k. I want a nice house but, don't want £100k+ tied up in it.

So the company would own the house?

The company would then need to apply for a mortgage on it. Last i looked (& i'm a little out of touch with UK stuff), ths would mean a commercial mortgage at 60% ish LTV?

I was under the impression, I can take a directors loan to pay cash for the property and then when I mortgage I can put the cash back in the company without any penalties?

Edited by WEHGuy on Sunday 30th September 15:28

[darreni]

One for Eric I think.

[AyBee]

darreni said:

One for Eric I think.

Or pay for some accountancy advice from the company accountant...it sounds fairly complicated and situation specific.

[WEHGuy]

I will speak to my accountant regarding the tax purposes but, I was interested in the mortgage side of it.

[Sarnie]

WEHGuy said:

Hi folks,

two questions really.

1.) Would I get a better deal on a mortgage if, I bought a house outright and then remortgaged it to release the equity rather than initially getting a mortgage to buy it?

2.) If I bought a house outright for say £350000, spent £50000 renovating it and then got it valued at £500k, would I be able to get a £500k mortgage?

Thanks in advance.

1)You would probably get a better product by using a mortgage to buy it in the first place and would be a whole lot simpler all round. If you buy it cash beware that no High Street lender will remortgage you until you have owned the property for six months. Also most lenders will not like the reason you are raising the cash. As it's to repay the money used to purchase the property it will be classified as 'Debt Consolidation' which carries it's own lending criteria. For example Santander will only allow you to raise a maximum of £30k for debt consolidation and others will limit the overall LTV for Debt Consolidation to less than 80%.

2) As long as the surveyor actual comes back with a £500k figure then yes you could lend against it based on the £500k valuation.

[Sarnie]

otherman said:

No, because either method is just a first time mortgage. In your example one its not a remortgage because it isn't mortgaged

Incorrect, it is a remortgage.

When you submit a mortgage application the lender will ask, "Is the applicant;

a) a First Time Buyer
b) a Next time Buyer
c) re-mortgaging.

a & b products would only for people purchasing a property, therefore obtaining a mortgage on an unencumbered property is classed as a re-mortgage.