Secured Loans

[sippo]

Does anyone know if Mortgage lenders offer secured loans anymore?

 

We went to see a house which needs a bit of work yesterday. Lovely area, structurally the house is spot on but an old gentleman used to live there. It's way under our budget on our mortgage offer but we have no cash assets.

 

In a dilemma what to do. With two young kids, we need to do the work before we move in ideally.

[witch]

Can you not see if your lender will lend you the full amount even though you don't need it all so that you can use the rest for improvements?

[abillybob]

I don't know if this helps but my mum had a Mortgage of 280,000. She bought a house for 160,000 and spent the 120,000 doing it up and this only happened 8 months ago.

[Joanne]

We got a home improvement loan a few years ago from Tesco. Pretty sure it was unsecured though... it was enough for us to get solar panels and a conservatory (built by us).

[mac_shinobi]

Can you not see if your lender will lend you the full amount even though you don't need it all so that you can use the rest for improvements?

 

See if you can talk to your bank or a mortgage advisor to see if there are loans tailored to include a mortgage and home improvement loan ( together ) so that you can obviously get the house and then have money left over to do the house up ( so to speak )

 

Which is pretty much what @witch was getting at ( or at least I think so )

[sippo]

Can you not see if your lender will lend you the full amount even though you don't need it all so that you can use the rest for improvements?

 

That was what I was thinking, but not sure if they did that sort of thing anymore. I'm guessing they value the house after the work/extension? Neighbours have done similar work so planning wouldn't be an issue.

[tmcd35]

They certainly do, although you may have to buy the property first before you can apply for a second charge on the property. It usually comes down to two things, equity and affordability. It'd be tough getting a combined (mortgage and secured) loan to value of more than 90%, 95% is tops and rare these days (some backing crises or other scared lenders away from 100%, 110% mortgages). If you can comfortably afford the repayments with a 5% interest rate increase and there is enough equity in the property for the additional borrowing you are after then you shouldn't have any problems.

 

Just bear in mind that it's an extremely expensive form of borrowing. Although the interest rate is very low, you're paying over a long period of time which makes for some scary repayment figures. You're usually better, if you can afford it, to get an unsecured loan at a higher interest rate over a shorter term.

[witch]

 

Just bear in mind that it's an extremely expensive form of borrowing. Although the interest rate is very low, you're paying over a long period of time which makes for some scary repayment figures. You're usually better, if you can afford it, to get an unsecured loan at a higher interest rate over a shorter term.

I don't agree - yes, it is over a long time, but then again if they had bought a house that took the full value of the loan they would be paying that anyway. They can always pay it off more quickly if they get the money at any point in the future but for now it is a cost effective way of doing the work necessary. @sippo Don't ask us, ASK THEM!!

[sippo]

I have emailed my mortgage advisor this morning, but just wanted to know if anyone else had done similar.

[sippo]

So the official answer is 'get a mortgage to fund the initial purchase and then look at short term borrowing to complete the work.

 

Once it’s all complete, we could then look at re-mortgaging the whole lot.'

[Achandler]

If you remortgage quickly you will be charged a massive amount most likely.

 

Personally, I would approach a local building society if there is one for you. The one near me offered to do 95% LTV on a variable rate to get the cash to do the house up, then let us do the house up and remortage (as long as it was with them) to a fixed rate at much lower LTV (75%) to allow us to get the much cheaper rate.

 

Bigger places don't allow it.

[tmcd35]

Personally, I would approach a local building society if there is one for you. The one near me offered to do 95% LTV on a variable rate to get the cash to do the house up, then let us do the house up and remortage (as long as it was with them) to a fixed rate at much lower LTV (75%) to allow us to get the much cheaper rate.

 

They will only lend based on what the property is worth. As in 95% of the properties current market value. That fact that @sippo has been pre-approved for and can afford a more expensive mortgage is immaterial. They are lending against the value of the property so there wouldn't be any extra at 95%LTV to spend on renovations. What he wants is a very risky 110% LTV but then needs to be pretty damn certain that any improvements is going to add more than 10% to the value of the property going in. Which is why the official advice is to get a unsecured personal loan then remortgage if necessary.

 

If @sippo can afford the same property on a 75% LTV mortgage, then why not get a 95% LTV mortgage and use the deposit to do the work?

Edited September 23, 2014 by tmcd35

[Achandler]

I was assuming he was going to use his deposit to do the work, hence get a larger LTV ratio to start with but then drop down through a remortgage. A lot of companies won't let you remortage after a couple of months even on the standard variable rates. This would be the only way to release any cash from the property potentially. You could even once in, do a small amount of work that adds value, and then get it revalued quickly afterwards.

 

I am more then aware of the mortgage market and how it works, having moved multiple times and recently as well.