Remortgaging in laymans terms....help!

whiteonesugar · 2021-05-26T09:31:10+00:00

Hi - this is really an embarrassing issue as I am 35yrs old, a professional with 2 children and yet i cannot understand mortgages and how remortgaging works if you want to borrow more rather than find a new rate. We bought a new build house under the HTB scheme just over 3 years ago. We fixed our mortgage rate which runs out late next year. We would like to be able to remortgage, draw down enough money to pay off the HTB loan (which was 20% - at the time £94k - likely to be more now). In really really simple terms what will we be able to take out of the house? EG - we paid £24.5K deposit, the gov paid £94k, the house was worth £475k. According to our mortgage statement we should have paid off about £45k by the time the fixed rate comes to an end. The house seems to have gone up in value, our neighbour has theirs for sale listed at £550k, but we don't think they will get more than £525k. So basing our house value at £525k for example, are we able to pay off the HTB - £105k. by remortgaging..? We could pay a bit more on the mortgage, we earn around £135k between us. I am so confused and I just don't really understand how this all works - embarrassing, but i just cant make it make sense in my head.

joabch · 26/05/2021 10:36

It basically comes down to if you have enough equity in the house and if you earn enough to qualify for a larger mortgage of that amount. We have recently remortgaged to withdraw some money for home improvements. We went via our broker and he just applied for a new mortgage for us based on an increased value of the house, we had to go through the normal application process as we moved to a different provider, and then when everything completed they paid off the old mortgage and sent us the remaining money.

wonderstuff · 26/05/2021 10:39

I think you're confusing yourself. Mortgage is a loan, you have paid off x amount of the loan and now need a new loan for remainder of original mortgage plus the 105k htb loan.

Your mortgage statement should give the outstanding amount.

The value of the house is significant because the lower the loan as a % of the property value, the better the interest rates you'll be able to get.

AKAanothername · 26/05/2021 10:42

The simple answer is yes, you should be able to remortgage to pay off the HTB.

Sounds like your original mortgage was approx £357k and when your fixed rate comes to an end your outstanding mortgage will be approx £312k.

With a joint income of £135k you should be able to remortgage for £420k (it's 3.1 x joint income) and pay off the HTB loan. A £420k mortgage on a £525k house is 80% loan to value and most mortgage providers would be happy with that.

wonderstuff · 26/05/2021 10:46

So doing the maths you give you have £311.5k mortgage outstanding, you want to borrow £416.5k which is more than you borrowed originally. You can find lots of mortgage calculators online to see how much that will cost you. I'd go to a mortgage broker who will be best placed to outline your options.

wonderstuff · 26/05/2021 10:48

Your new mortgage will pay off the old one and the extra borrowing will pay off the loan.

BarbaraofSeville · 26/05/2021 13:49

If you have a fixed rate, it's likely that there are early repayment penalties, so unwise to change your mortgage unless you get a much better rate, that saves enough to make it worth paying the penalty.

But isn't a Help to Buy loan interest free for the first five years? So no point paying it off by remortgaging in the early stages, because it will be replaced by borrowing that has an interest charge.

Original poster

whiteonesugar · 26/05/2021 14:07

Thanks everyone I think I over complicating it myself!

@BarbaraofSeville - we were thinking of paying the HTB off so it doesnt keep going up. It's interest free for 5 years which ends Feb 23, but the 5 year mortgage fixed rate ends Sept 22 which is when we would look at remortgaging. If the house gets more valuable then the Amount to pay back to HTB keeps going up as it's a percentage of the house value. If that makes sense? This is where i get a bit brain muddled.

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BarbaraofSeville · 26/05/2021 14:15

Oh. I didn't realise that. Calling it interest free is quite misleading then isn't it?

I'm surprised they can get away with that. Years ago there was something called a shared appreciation mortgage, which was awful for buyers and it sounds quite like that. It was the scandal of the day, like self cert or PPI now.

Original poster

whiteonesugar · 26/05/2021 14:59

Yep its cheeky but a means to an end for us - most people look to remortgage after the 5 years to avoid paying interest, and either pay 50% or 100% off, but yes, it increases, probably to allow for the interest free period! (which isn't completely true, we pay £1 a month to them!)

Luckily we will be in a position next yr to afford a bit more, so if the mortgage payments increase it's not the end of the world, but we also have the security that if we sell up we take 100% of the profit.

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girlbossmomma · 12/01/2023 08:49

whiteonesugar · 26/05/2021 14:59

Yep its cheeky but a means to an end for us - most people look to remortgage after the 5 years to avoid paying interest, and either pay 50% or 100% off, but yes, it increases, probably to allow for the interest free period! (which isn't completely true, we pay £1 a month to them!)

Luckily we will be in a position next yr to afford a bit more, so if the mortgage payments increase it's not the end of the world, but we also have the security that if we sell up we take 100% of the profit.

Hi white! What did you do in the end please? In a similar situation currently and trying to figure out best route to pay off the HTB loan. Im also 30+ and clueless 🥴 lol Thanks in advance!

Original poster

whiteonesugar · 12/01/2023 09:45

Hi @girlbossmomma

I found a shit hot mortgage broker and he sorted it basically! We remortgaged in Oct last year. On his advice we got our mortgage offer in summer before the rates really hiked, so were able to borrow what we needed to cover the HtB loan. Basically we had enough equity (it had gone up in value and we had paid off a good chunk of the mortgage) to borrow the extra and still leave a decent amount of equity in the house.

The payments are higher than they were and we had to extend the term a little, but it's manageable and fixed for 5 years. If we had waited even a month or so, we wouldnt have been able to borrow as much due to the interest rates, we were lucky!

Good luck!

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girlbossmomma · 12/01/2023 09:49

whiteonesugar · 12/01/2023 09:45

Hi @girlbossmomma

I found a shit hot mortgage broker and he sorted it basically! We remortgaged in Oct last year. On his advice we got our mortgage offer in summer before the rates really hiked, so were able to borrow what we needed to cover the HtB loan. Basically we had enough equity (it had gone up in value and we had paid off a good chunk of the mortgage) to borrow the extra and still leave a decent amount of equity in the house.

The payments are higher than they were and we had to extend the term a little, but it's manageable and fixed for 5 years. If we had waited even a month or so, we wouldnt have been able to borrow as much due to the interest rates, we were lucky!

Good luck!

Ooh amazing! Thanks so much for replying btw. Just wanted to also ask if your income was taken into account also? Unfortunately, we have not paid anywhere near what you had but our joint income is about 130k. Will that be taken into account? Honest google
Is useless and I like to do my research before actually talking to advisors etc so I don't look silly! 😝

girlbossmomma · 12/01/2023 09:49

whiteonesugar · 12/01/2023 09:45

Hi @girlbossmomma

I found a shit hot mortgage broker and he sorted it basically! We remortgaged in Oct last year. On his advice we got our mortgage offer in summer before the rates really hiked, so were able to borrow what we needed to cover the HtB loan. Basically we had enough equity (it had gone up in value and we had paid off a good chunk of the mortgage) to borrow the extra and still leave a decent amount of equity in the house.

The payments are higher than they were and we had to extend the term a little, but it's manageable and fixed for 5 years. If we had waited even a month or so, we wouldnt have been able to borrow as much due to the interest rates, we were lucky!

Good luck!

Ooh amazing! Thanks so much for replying btw. Just wanted to also ask if your income was taken into account also? Unfortunately, we have not paid anywhere near what you had but our joint income is about 130k. Will that be taken into account? Honest google
Is useless and I like to do my research before actually talking to advisors etc so I don't look silly! 😝

girlbossmomma · 12/01/2023 09:50

whiteonesugar · 12/01/2023 09:45

Hi @girlbossmomma

I found a shit hot mortgage broker and he sorted it basically! We remortgaged in Oct last year. On his advice we got our mortgage offer in summer before the rates really hiked, so were able to borrow what we needed to cover the HtB loan. Basically we had enough equity (it had gone up in value and we had paid off a good chunk of the mortgage) to borrow the extra and still leave a decent amount of equity in the house.

The payments are higher than they were and we had to extend the term a little, but it's manageable and fixed for 5 years. If we had waited even a month or so, we wouldnt have been able to borrow as much due to the interest rates, we were lucky!

Good luck!

Ooh amazing! Thanks so much for replying btw. Just wanted to also ask if your income was taken into account also? Unfortunately, we have not paid anywhere near what you had but our joint income is about 130k. Will that be taken into account? Honest google
Is useless on this topic and I like to do my research before actually talking to advisors etc so I don't look silly! 😝😁

Original poster

whiteonesugar · 12/04/2023 09:09

@girlbossmomma SO sorry this is so late I only just saw you had posted!

Yes they did as the mortgage is joint, if it's both of you they will take both incomes into account, both credit scores, both debts etc etc

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