Mortgage and Remortgage questions

salami1212 · 23 Aug 2011 at 15:27

Hi. Is it possible once you have paid off your house fully, to then remortgage it for the full amount in cash?

krooton · 23 Aug 2011 at 15:27

You mean use your home as equity against a loan?

Vonhelmet · 23 Aug 2011 at 15:28

salami1212 said:
Hi. Is it possible once you have paid off your house fully, to then remortgage it for the full amount in cash?

The question I have at the forefront of my mind is... Why?

Jez · 23 Aug 2011 at 15:29

Simplistically yes, in theory. Of course it is. Whether or not you would find anyone willing to give you a 100% mortgage these days is another question.

salami1212 · 23 Aug 2011 at 15:33

Jez said:
Simplistically yes, in theory. Of course it is. Whether or not you would find anyone willing to give you a 100% mortgage these days is another question.

Ok. Whats the norm, like 80%?

Jez · 23 Aug 2011 at 15:39

salami1212 said:
Ok. Whats the norm, like 80%?

85% is widely available at OK rates, 90% is widely available at a premium. Much more than that and you would be paying through the nose if available at all.

salami1212 · 23 Aug 2011 at 15:39

Vonhelmet said:
The question I have at the forefront of my mind is... Why?

I have an idea

LiE · 23 Aug 2011 at 15:39

Depends if you want a good rate.

salami1212 · 23 Aug 2011 at 15:44

Jez said:
85% is widely available at OK rates, 90% is widely available at a premium. Much more than that and you would be paying through the nose if available at all.

Ok cheers. If I managed to find a 100% mortgage, and then was paying it off at like 5% rate, I take it they wouldnt allow you to remortgage whenever you wanted once youve paid some of it off?

Jez · 23 Aug 2011 at 15:45

Depends entirely on the product

Most at the higher LTVs will have lockin periods with early repayment charges (ERCs).

salami1212 · 23 Aug 2011 at 15:49

So essentially at the moment, if you want to pay off your house early you get penalised for it?

Jez · 23 Aug 2011 at 15:52

It depends on the product, and what you agree to at the time of buying into it. Typically on a high LTV deal then yes there will be an ERC period.

Vonhelmet · 23 Aug 2011 at 15:52

salami1212 said:
So essentially at the moment, if you want to pay off your house early you get penalised for it?

Yes. This is invariably the case.

My mortgage, for example, allows me to pay up to 10% of the outstanding balance each year. Beyond that, there is a scale of penalties.

salami1212 · 23 Aug 2011 at 15:55

Vonhelmet said:
Yes. This is invariably the case.

My mortgage, for example, allows me to pay up to 10% of the outstanding balance each year. Beyond that, there is a scale of penalties.

This is ridiculous! What are the penalties on for example, your house?

And is this Law for the mortgage companies? Or just pure greed?

Jez · 23 Aug 2011 at 15:57

salami1212 said:
This is ridiculous! What are the penalties on for example, your house?

And is this Law for the mortgage companies? Or just pure greed?

Jez said:
It depends on the product, and what you agree to at the time of buying into it. Typically on a high LTV deal then yes there will be an ERC period.

Its not ridiculous, its written in very plain english in the key facts page when you buy into the product. This only generally applies to high LTV deals and is one of the penalties for borrowing a large amount (along with an uncompetitive rate). I have a couple of lower (<60%) LTV deals where there is no ERC period at all.

salami1212 · 23 Aug 2011 at 16:02

Jez said:
Its not ridiculous, its written in very plain english in the key facts page when you buy into the product. This only generally applies to high LTV deals and is one of the penalties for borrowing a large amount (along with an uncompetitive rate). I have a couple of lower (<60%) LTV deals where there is no ERC period at all.

It is ridiculous. Ok youve borrowed more at the start of the loan but then once you want to pay back some of it to reduce the high interest and fees etc, then you get penalised for it!

Surely if you decided to pay back some of the loan, then the LTV would go down and the ERC should reduce.. no?

JeffH · 23 Aug 2011 at 16:03

Would an off-set mortgage allow you to do what you are wanting to do?

Jez · 23 Aug 2011 at 16:05

If you think it is ridiculous dont do it. Simple?

If there was no ERC you could simply bail as soon as you liked and the lender would not make the money they wished to make which made the deal represent the risk of the high LTV deal in the first place. The deal has to be worthwhile for both parties...

If you are not comfortable with an ERC then dont borrow at such a high level, hardly any products at a lower risk level (to the lender) will have any form of ERC attached to them

Stretch · 23 Aug 2011 at 16:11

salami1212 said:
This is ridiculous! What are the penalties on for example, your house?

It's high enough to make sure you don't do it. My early repayment charge is £6k, but I've seen others which are as much as 5% of the outstanding balance.

salami1212 said:
And is this Law for the mortgage companies? Or just pure greed?

I can understand it from the banks point of view. If you agree to get into fixed term mortgage then there must be something to prevent you switching if rates go down. You enter into a contract and they expect to make their profit one way or another.

JeffH said:
Would an off-set mortgage allow you to do what you are wanting to do?

Yes, there are generally no early repayment charges for off-set or tracker mortgages. However, you'd find it very hard to get one of these at 100% LTV.

salami1212 said:
Ok cheers. If I managed to find a 100% mortgage, and then was paying it off at like 5% rate, I take it they wouldnt allow you to remortgage whenever you wanted once youve paid some of it off?

For the first few years of your mortgage 95%+ of your repayments go to pay interest alone.

If you need to mortgage 100% of your property your best bet would be to take any mortgage you can (probably fixed for 3-5 years) keep making the payments + any extra you're allowed. Then save the rest to use as a deposit/equity for when you remortgage.

To borrow £200k at an LTV of 100% you'd be talking ~£50k in interest payments over 3 years. It's not a good idea unless you have a very good idea what you want to do with the money.

Jez · 23 Aug 2011 at 16:18

Stretch said:
Yes, there are generally no early repayment charges for off-set or tracker mortgages. You'd find it very hard to get one of these at 100% LTV though.

It depends entirely on the LTV in question. I can assure you that there are ERCs on almost every tracker mortgage i have ever seen above about 75%.