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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk/
Tel: 0345 345 6788
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Question
Remortgaging advice – can I get additional money?
We are thinking about adding an extension to our house to create an extra bedroom and extend the kitchen. We have been quoted £65,000 or thereabouts – on average – by three builders.
I wondered whether it would be possible to get a remortgage for this amount of money. Fortunately, we are due to remortgage in February and I can see the rates are very attractive. Our house is probably worth circa £345,000 and we have equity of around 30% in our home at the moment.
Thanks so much for your help!
Answer
How exciting! By my maths, you owe around £240,000 on your mortgage. If you increase your borrowing by £65,000, it’ll take your loan to value (LTV) to just over 85%.
Generally, lenders are very open to remortgaging and giving you extra borrowing, particularly for home improvements like this. However, you will find you have more options if you keep the total borrowing up to or below 85% of the property value, and the pricing will be more competitive.
Assuming your property’s current value is £345,000, 85% LTV would mean a new increased mortgage of £293,250, which is a little short on what your builders have quoted. As this would be the most cost-effective way to borrow the money, perhaps you can make up the shortfall with savings or a personal loan? Good luck!
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Question
What is a guarantor and how will this help me get a mortgage?
I have been looking into buying my own home and with very little in the way of a deposit someone suggested I could either try shared ownership or a guarantor mortgage.
I am not keen on shared ownership as I don’t believe I will be eligible since I work in IT and have good job prospects going forward (I graduated just over a year ago). But I like the idea of having a guarantor? Can this be a parent or grandparent and how does it work?
Answer
A guarantor is someone who takes ultimate responsibility for ensuring that the mortgage gets paid. If you don’t pay, your lender will expect them to produce the payment.
During the application and underwriting process, the main focus of affordability will be on your guarantor, which should allow you to borrow more than if you’d been relying on your salary.
Generally, lenders prefer this arrangement to be between family members, in particular parents and children rather than grandparents due to the impact age can have on affordability calculations. I recommend speaking to a mortgage broker who will be able to guide you through this process.
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Question
I am a contractor – how can I find a mortgage?
I am due to remortgage but my employment circumstances have changed and now I am struggling to get an approval. For information I used to work in marketing for a small company and was employed when I bought my first house.
I purchased with a small deposit – 5% – and I am now due to remortgage two years later. My house has gone up in price by 2% which is amazing, but my employment situation is a bit different.
I had to switch to freelance work during the pandemic and although I have now gained a position on a one-year contract, the mortgage lenders don’t seem keen on this. Can you please help?
Answer
I’m sorry your employment has been affected by the pandemic and that it’s making remortgaging a challenge. Typically, lenders require at least a year’s record of contract income, which obviously doesn’t help you right now.
I would speak to your existing lender and see whether they can offer a product transfer as these often don’t involve any underwriting. Hopefully, that helps!
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Question
Estate agent wants proof of mortgage
My wife and I are in the process of looking for our first home and we found a property which was ideal. However, we were both a little shocked because the estate agent asked for evidence of our mortgage and said we would be able to place on offer unless we had a loan in place.
Is this normal practice and, if so, how do we get a mortgage approved without actually having a house to physically buy yet? We would be grateful for any advice as we are both new to this and neither of our parents are homeowners so they cannot advise.
Answer
I’m afraid that presenting a mortgage agreement in principle (AIP) when making an offer on a property is a common practice by many estate agents. From their point of view, it proves you have the means to pay for the property and demonstrates a commitment to the purchase.
Luckily, it’s relatively simple to attain an AIP, even without a specific property in mind, as it’s just a case of a lender sense checking the amount you want to borrow versus income and your credit file. A mortgage broker can do this for you quite quickly, based on a ‘we think the purchase price will be X and therefore, the loan we would need is Y’ basis.
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