Buying/ Selling House

dinyull

We are currently thinking of putting our house on the market to move to a bigger house. But I'm completely in the dark where it comes to how much we could lend etc.

Done online mortgage calculators and it looks like we could borrow more than enough for what we're after.

But, I'm concerned that we have a loan payment that is 3/4 cost of our mortgage payment and this could scupper things.***

We plan on using some of the equity from the house sale to pay off the loan and use the remaining for the deposit - does this sound reasonable??

The missus has been into talk to someone at our bank today and they said they'd advise against speaking to their mortgage adviser UNTIL we have our house on the market. This is because it'll put a mark on our credit score. But I'm reluctant to put the house on the market without knowing for sure how much we could borrow.

Any advice???

***edit - loan was for home improvements - new windows, decorating, new bathroom suite and garden landscaping. Oh, and the loan and mortgage is with the same company.

dinyull

Another problem we have is, my wife has a poor credit rating so I'd have to go alone on the mortgage application (like my current mortgage).

Is their anyway I can include her income as additional income to me? She earns a decent wage and we split all bills 50/50.

pblakeney

What is the standard advice for this situation?
Cut up your wife's credit cards. No, seek professional advice. Then cut up the cards.

dinyull

We've already tackled that.

Sadly, credit ratings take a while to improve.

shirley_basso

Have you tried using a mortgage broker? I can highly recommend them and if you have fairly usual circumstances (it seems you do), then most won't even charge a fee. A decision in principal shouldn't leave a mark on your credit score. I had a poor credit rating when I got a mortgage and my broker was able to assist with that. The bank paid him the fee, not me. Even if you use a broker you pay to use, then it sounds like it would be good value for money for you as it may increase the amount you are able to borrow.

Assuming your home improvements have increased the value of your property, you would be wise to increase your mortgage to pay off the other loan as the interest on the mortgage would normally be lower, thus payments would likely go down overall. Furthermore, it is possible that this other loan is secured against your property so you may be forced to repay it when you sell. If it is unsecured then I imagine it will be costing a lot in interest, in which case you should definitely consider repaying it.

From what you have said it seems you would be best placed from speaking to an advisor as this is some routine stuff that a professional should be able to explain to you. As noted, some take a free from you AND the bank, and some take a fee from the bank only. I used the latter, so free to me, and it was pretty useful to understand how the process works, even though I am a banker myself.

dinyull

Cheers

Yep, used a mortgage broker for the current deal we're on. Should give him a call.

The loan is secured, and I want to pay this off with the equity we have (over 1/3 of approx property value).

shirley_basso

I guess there are some nuances - did you buy the existing property with your wife and has her credit rating deteriorated since then? If so then I am not sure the way around that, but the broker may be able to help.

If the other loan is second ranking, it would usually cost you more, but as it is with the same bank I don't know. I guess you know the rates and a simple spreadsheet can tell you the saving if you swallowed it up with your mortgage. If it is secured you will definitely have to repay when you sell.

If you go back to the same broker then note that sometimes they may not be eligible for a fee from the bank if you stay with the same lender, so just double check that to ensure he's showing you offers from your existing lender.

rick_chasey

Pay off the loan before taking on a bigger mortgage, especially if it's unsecured.

shirley_basso

The loan is just an extension of the mortgage so i'd just think of them as one, given it's the same lender and is secured.

rick_chasey

Ah fine.

Shirley's right then; speak to your broker.

dinyull

Rick Chasey wrote:

Pay off the loan before taking on a bigger mortgage, especially if it's unsecured.

That's the plan. Use the equity in our house sale to pay off the loan.

rick_chasey

Dinyull wrote:

Rick Chasey wrote:

Pay off the loan before taking on a bigger mortgage, especially if it's unsecured.

That's the plan. Use the equity in our house sale to pay off the loan.

Yeah; I guess that works if the interest is higher on the loan.

Will that leave enough cash lying around for the deposit for a bigger mortgage?

shirley_basso

As noted, you'll probably find you have to anyway as it's secured. If the security disappears then the loan has to be repaid unless the bank allows to to convert to unsecured, which could be expensive depending on amount.

F/X, Clydesdale bank will lend you about 15K at around 2% on an unsecured basis. More than that and rates go up quite quickly.

plowmar

If the loan and the mortgage are covered by the same property and with the same lender, then the lender will repay both loans when you sell the house. ( they wouldn't have given a further advance if there wasn't sufficient equity ). Pending a minimum deposit needed then it would be up to you as to how much extra to put in.
Independent broker likely to be best way to go as they tend to have access to more mortgages.