[Closed] Mortgage question...borrowing more

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I don't want to be unhelpful OP, but I do hope you are saving in lieu of mortgage principal re-payments.

Thanks, but if I do this extension I will be sitting on £600k of equity with no desire to live the rest of my life in London so will move out at some point.

I've got young kids so want the space now not years down the line when I inherit a bit of cash.

can I keep the interest only part running

I have nothing constructive to add other than to comment that your extension is worth over twice the value of my house...

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No disrespect intended OP - lots of my contemporaries are doing this, without repayment plans or even pension contributions.

I'm sure you intend to do the planned move ahead of the curve, so to speak. Lots of our new ex-London neighbours in Bristol have done this.

in the past using the excuse 'I'll downsize in the future to pay it off' would have been deemed a credible repayment strategy, not any more. I work for a bank and we have a lot of people who when it comes down to it aren't prepared to downsize and finding themselves up the creek without a paddle because they haven't made any suitable provision. You've lived in that property all your lives, you've improved it and your kids grew up there. Do you really want to sell it?

I will ask them but it's Saturday night and know there will be some finance bods on here

In very similar circumstances as you (aside the amounts) and we wanted to do the same as you with our current lender (C&G) but it was a stipulation of borrowing more that we had to switch to a repayment on the interest only portion of the mortgage

A good question about the selling. Can't 100% say I'll want to, who knows but when it's just me Nd the Mrs left I won't need a 5 bed house in London. I'm only here for work and the way that's going it will be home working within a few years so could be anywhere

That's interesting Nuke. Repayment on the whole lot is fine now but 6% would be tight

Quite frustrating as our strategy was going to be hammer each portion of the mortgage separately (our mortgage would have consisted of 3 mortgages in one if we'd borrowed more) starting with which portion of the mortgage had the highest rate...the interest only portion has the lowest interest rate so we didn't want to start repaying that portion initially

Not surprisingly we couldn't find a new mortgage lender who would have lent us the amount we wanted on a similar interest only deal as our existing lender

Exactly the same Nuke. Mine will be 3 also if I borrow more. 30k of that 290k is repayment from earlier work when we moved in 10 years ago

Who is your lender. High Street wise only Santander from memory now only lender offering interest only BUT with big criteria demands. Approaching your current lender could open a can of worms and alot of questions about your repayment plans and not many accept downsize anymore. However they are tied to your current mortgage so in theory have to honour the current interest only debt. But if you told them you have an investment plan when you applied, endowment, equity ISA, pension and put this on your application form and now do not OR worse did not arrange a new one to repay mortgage when you said you would this could cause you future problems. Many may insist any new element of mortgage has to be repayment on extra borrowing. I am a Regional Mortgage Manager for a high street bank.

I'm with nationwide and to be honest have no idea what was said as it was 10 years ago and back in the day when they handed out cash quite freely.

Since then I've had 2 kids so wife not been working much but now starting to earn ok again hence the borrowing more and maximising the equity in this house coming up.

So 420 against a value of 600 would give a 70% LTV, so potentially in the realms of decent mortgage deals.

But they'll lend on the value now, not the value when the work is done. I just remortgage to raise £25k for an extension, and had to jump through every hoop going, despite the new mortgage being under 65% LTV of the current value of the house. The extension will stick £50k on the house. London & Country broker sorted it all out for me, but it was a painful process, and despite an immaculate credit rating, and being very well paid, I couldn't have borrowed any more under the new lending rules.

So 420 against a value of 600 would give a 70% LTV, so potentially in the realms of decent mortgage deals

Nope, MM said 600k [u]equity[/u], not value...which puts LTV at circa 40%

House is £700k+ at the mo so a better ltv. The much tighter lending criteria sounds like it could ruin my plans.

House down the road which has a similar, not as good extension went for a million in less than a week a couple of months ago. Shame they won't take that into consideration.

Hmm I read it as £420k mortgage and additional £130K will leave £560K total mortgage and £600k equity so £1.1M house value. It's a 5 bed in London so very possible!

Damn glad not to have a mortgage of that size especially since there appears to have been no repayment plan in place.

We just extended ours from 100k to 150k (on a 300k house) for a conservatory. Lenders would not consider 150k interest only. We have switched the whole lot to a repayment which makes sense to us right now. Best of luck with it and can we have a build thread for the extension!

At the mo £290k interest only on a £700k+ house (was overpaying but been saving up a pot)

Want to have a £420k part/repayment on £1 million house

(Im 41 so have some years left for paying off)

Jeez DB is that what a conservatory costs! This extension will take from a 3 bed semi to a 5 double bed. Massive kitchen diner, and office.

If you want interest only a re-mortgages to Santander might be only option. For them Interest only rules are 150k minimum equity, max loan to value 50%, minimum joint income 75k per annum, lending till 65 years old maximum term. Walking from Nationwide might incur penalty and you will lose the 2.0% above bank of England if you have it

Nationwide should keep the current debt interest only and do extra on repayment - just expect questions about your current interest only

Could always take a secured loan from another provider as 2nd charge and then you wouldn't face difficult questions from your mortgage company. BUT the rates would likely be higher and you're only putting off the inevitable.

London is essentially a different market to the rest of England. What dosn't work in England might be doable in London. I've not seen the option you're looking for on the high street. But there are 1000's of mortgages out there and most aren't on the high street.
It sounds like you need to speak to a mortgage broker. We paid £300 for an independant broker and saved £5k so the maths works. A good one will know the options. Don't go to Foxtons!

Interest-only mortgages were banned by BoE for a very good reason! Serving you well so far does not mean serving you well in future...

I really wouldn't make any plans based on the assumption that London prices will keep rising... they're so far ahead of salaries and all historical precedence now... with BTL being sent to the slaughterhouse by Osborne and the stories about prime London coming to a grinding halt, and prices so far out of reach of FTBers I really can't see where the buyers are going to come from at the bottom end to keep prices rising...

You really really need to do some reading around the global economy and especially prime London before you think about piling on more debt...

Interest only mortgages are not banned!!!! For existing or new lending. Most lenders are not happy giving them to new lending but one or two do and they are from well known high street lenders

Interest-only mortgages were banned by BoE for a very good reason!

Source ?

Interest rate only mortgages were discouraged for a relatively short while after the 2008 crash...but governments and central banks have quickly changed their tune since deciding a re-inflated housing bubble is the only answer to our woes.
Normally interest rate only mortgages preside the bursting of a housing bubble but governments will do everything and anything to stop that happening now, including negative interest rates. In such an environment, I'd probably take on the extension.

OK, I stand corrected. Either way - 8 years into a crisis which started with mortgage lending to people who couldn't pay it back which damn nearly brought the whole global economy to its knees and we think interest-only mortgages and generally getting into more debt is a good idea? 😯 Is no-one reading the financial papers before they make decisions about taking on massive debt?

one or two do and they are from well known high street lenders

Badnews, is right though, I fear. Osborne bought the last election with a deliberate stoking of the housing market with Help To Buy - he know how the Brit mindset works with house prices and mortgages... + I suspect if the housing market dropped now the bad debts would all appear on the banks' balance sheets and we'd be straight into another crisis with no way out this time.

Meanwhile the younger generation are being expected to get themselves into a lifetime of massive massive debt just to keep us lot feeling rich... I reckon there'll be a hell of a shock when we realise they aren't prepared to play that game...

Interest only is not given away - they have very stringent underwriting criteria see my post above. Lenders banks/building societies have far more / higher levels of cash reserves than previous lending problems times as per bofe fca rules. Even a grand lent on a million pound property has risk BUT the times are different and regulation is different.

Sorry bofe is industry term for Bank of England

There is a massive shitstorm brewing regarding IO mortgages, when/if the banks start calling them in. People on expired terms with no means to repay the debt and refusing to sell their property to pay it. It'll mean loads of bad press for the first lender to start, but it just takes one to start the ball rolling.

That really the build cost of the extension? Hell of an extension!

Anyway, we'd be in a better position if interest only was banned and we were back to 3 times salary for a mortgage. Yes, virtually no one could afford to buy a house at present, but good. Crash and back to sensible values people can afford, or we rethink the whole thing and move to a lifetime rental system like in Europe rather than short term rents for maximum profit and those renting not investing in or caring about the property they rent. In much Europe you rent a house and can't generally be kicked out, make it your home, decorate, furnish, even modify and extend. No need to buy, and everyone has a chance of a decent home to live in with this need to build tonnes of houses to over supply in the vague hope that it will deflate prices (it won't).

Trouble for lenders could be... when going to court to repo will courts decision just be....hang on customers paid for last 25 years....never missed a payment....no repo just let borrower continue to pay you interest only?!?!

But yes the company I work for are starting to talk about repo proceedings for end of term interest only repayment

In my experience when you add to a product you'll get the extra bit on SVR or similar and as repayment. This is normally fine, just roll it into the main product when you remortgage.

The way things are in UK finance those who can't afford to settle IO mortgage at end of term will probably end up launching and winning mis-selling actions against the banks. It'll be the next helicopter drop.