Re mortgaging questions?

[lau86]

Just wondering if anyone can help with this... By next may we'll have been in our house two years and will need to re mortgage. I've heard of people using money from their house to do home improvements but I'm not quite sure how it works. We need a new bathroom. Has anyone done this or know anyone that has? There's not alot of chance of us saving the money so if we can't do it that way we'll have to just leave it as it is. Thankyou!

 

[lindseymw]

It will all depend on how much equity is in the house as to how much you will get. For example:-

House Value £100,000
Current Balance of Mortgage £70,000
Equity = £30,000

In essence you could remortgage for £100,000, pay the £70,000 back to lender & be left with £30,000 cash. However, it is a bit more complicated than that as lenders have limits of % of how much they will lend. I.e 75% so you would get £75,000.

You also have to take into consideration the fees, lenders & solicitors fees. If you are in a fixed term as well you may be stung for an early repayment charge (can be £1000s).

If you are looking at doing your bathroom, I'd look at getting a loan rather than remortgage. Much cheaper in the long run.

 

[lau86]

ahh, thanks for that! Our contract is up next year so we would have to find a new one anyway as far as i know, would we still get penalised for that?
sounds like it's not the cheapest way of doing it as i guess we'd be paying for it for 30 years or whatever! i'll look into a loan instead.

 

[Mummy Bean]

I assume u got a fixed term contract? When that ends ur mortgage provider will automatically put u on the varible rate mortgage...so with current low rates cud actually be cheaper ( but only for time being). when this happens u can do three things, firstly leave it as it is ...but u run the risk of interst rates increasing but this shud cost u nothing. secondly stay with ur current provider and get a new fixed term - they may charge u a few for setting it up, but often u can add this fee to ur mortgage. and finally u can move providers, again u will most likely need a few, and the new provider will ask for valuation, bank statement ect but u will need to get a solicitor involved wont cost much but i wid budget around £500-£1000.
as pp said u can get equity out ur house by getting a bigger morgtage then u currently have. or as u say just get loan. although i personally always recomend a credit card...as much more flexible repayment options. just remeber to open a new one everytime the 0%offer runs out.