equity in a house Help understanding ?

baz178 said:
In what way be careful ?
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Presumably don't do either of these options:

danlightbulb said:
B) take out a bigger mortgage on the newly higher valued property, which you'd get the difference between old and new mortgage paid into your bank account to do with as you please ("equity release"). Obviously your monthly payments would increase or your mortgage term or both.

3. Sell the house and move. You'd sell it for more than you owe on the mortgage so you'd have some cash left over and can trade up or buy another do-er-upper and do the same again.
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A lot of folk get tempted by the equity release number and then blow it ***** forgetting they still need to pay it back.
 
Equity release is just taking out a massive loan, normally they wouldn't do it but call it something other than a loan and they jump all over it.
 
lemonkettaz said:
If you bought the house for example of 100k, you do upgrades, you get a valuation of 150k

You pocket the difference plus what you have already paid off of the original mortgage, minus fees and costs of renovation.

But you are now paying a mortgage worth 150k not 100k
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This is nonsensical, you've just contradicted yourself - what do you even mean by "pocket the difference" if you also believe that the mortgage has increased what difference is being "pocketed"? You're making no sense.

Back in reality your mortgage is unchanged relative to no improvements, a mortgage is simply a loan secured on your property.

If OP looks for a new mortgage at the end of say a fixed rate deal or is perhaps considering switching from say a tracker with no penalty now then it might well be the case that his LTV % has improved in his favour to the point that he's able to get a lower rate. This can happen irrespective of improvements if prices have risen in his area, but improvements can add additional value.

Obvs if the improvements are just installing a new kitchen or some fancy flooring it is probably going to be a more iffy argument, that might please an estate agent and help a property to sell but perhaps isn't too impressive to a mortgage company churning out valuations. On the other hand adding square footage to the total floor space of the property, adding an extra bedroom etc. gives a clear, objective argument for an increase in valuation.
 
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As mentioned the benefits from reduced LTV ratio will be offset by rising interest rates when it comes to remortaging. Even going from say 90% LTV to the lowest possible LTV (typically 60%) will probably reduce the rate by an amount less than it will have gone up anyway. So you took the mortgage in January, presumably based on a mortgage offer before rates starting rising at the end of December, so base rate 0.1%. Base rate is now 1.75% and probably will go up again this week. By the time you actually finish the build and go to take out a mortgage it could be higher still. So even if you have gone from 90% LTV to 60% LTV brackets the new 60% LTV mortgage should cost more in interest than the old 90% one (assuming it was fixed).
 
dowie said:
This is nonsensical, you've just contradicted yourself - what do you even mean by "pocket the difference" if you also believe that the mortgage has increased what difference is being "pocketed"? You're making no sense.

Back in reality your mortgage is unchanged relative to no improvements, a mortgage is simply a loan secured on your property.

If OP looks for a new mortgage at the end of say a fixed rate deal or is perhaps considering switching from say a tracker with no penalty now then it might well be the case that his LTV % has improved in his favour to the point that he's able to get a lower rate. This can happen irrespective of improvements if prices have risen in his area, but improvements can add additional value.

Obvs if the improvements are just installing a new kitchen or some fancy flooring it is probably going to be a more iffy argument, that might please an estate agent and help a property to sell but perhaps isn't too impressive to a mortgage company churning out valuations. On the other hand adding square footage to the total floor space of the property, adding an extra bedroom etc. gives a clear, objective argument for an increase in valuation.
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I must have got it wrong, I am no expert. I'm guessing even my laymen explanation is wrong ?
 
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