ReesesPieces
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- 41
Five years ago, we took out a mortgage to buy our house. We had a good deposit, and an AIP for I think 330k, we only drew down 230k to buy a house which we planned to do a substantial renovation and extension on. We spoke to a couple of architects at this time and felt confident we could do it for the additional 100k.
In the end however, when it came to renovate, one of us had moved jobs so was in probation, one was on mat leave, and the actual cost of the build had gone up so we planned to do a lot of work ourselves. We were advised that getting this financed through the bank would be a big challenge. One of our parents offered to lend us the money: they had a large lump sum they were getting literally no interest on, are very risk adverse and could not be persuaded to invest it due to being burned before so it was basically sitting in a current account, and so we agreed a long term loan to borrow 110k at 1% over a similar lifetime to that of our mortgage.
We've been paying off our mortgage, and this loan, since, but we're at the point where we want to switch mortgage for a better rate and I have two questions.
1) Will this loan affect us switching, or cause problems with a bank? The amount we've borrowed and the amount on our mortgage is within affordability limits, we're both in permanent jobs and the work we did has substantially increased the value of the house: I'd say we have a 50% or less than 50% LTV.
2) Is there any way we could 'roll up' this loan into the mortgage? This is where it gets tricky. We haven't spoken to the parent who leant us the money about this, but it was a solution that seemed to work for everybody at the time and now we're wondering if it would be more straightforward to simply have all borrowings with the bank. No real reason for this, just a slight concern that in the event of the parent somehow needing it, we might not be able to get it. Plus, they're in their late seventies: they have other assets, but I literally have no idea how it would work in the event of care being needed in the future while the loan was outstanding. There are no other siblings to consider, and there's no bad feeling, I think its just something that was suggested to us and we agreed to without really thinking about the long term.
Even though its a loan to do work on the house, would a new bank consider lending so we can pay it back? Or would that be a form of equity release? Should we got to a broker? We obviously will be approaching people but I feel I need to figure out what is likely before we start discussing with professionals.
In the end however, when it came to renovate, one of us had moved jobs so was in probation, one was on mat leave, and the actual cost of the build had gone up so we planned to do a lot of work ourselves. We were advised that getting this financed through the bank would be a big challenge. One of our parents offered to lend us the money: they had a large lump sum they were getting literally no interest on, are very risk adverse and could not be persuaded to invest it due to being burned before so it was basically sitting in a current account, and so we agreed a long term loan to borrow 110k at 1% over a similar lifetime to that of our mortgage.
We've been paying off our mortgage, and this loan, since, but we're at the point where we want to switch mortgage for a better rate and I have two questions.
1) Will this loan affect us switching, or cause problems with a bank? The amount we've borrowed and the amount on our mortgage is within affordability limits, we're both in permanent jobs and the work we did has substantially increased the value of the house: I'd say we have a 50% or less than 50% LTV.
2) Is there any way we could 'roll up' this loan into the mortgage? This is where it gets tricky. We haven't spoken to the parent who leant us the money about this, but it was a solution that seemed to work for everybody at the time and now we're wondering if it would be more straightforward to simply have all borrowings with the bank. No real reason for this, just a slight concern that in the event of the parent somehow needing it, we might not be able to get it. Plus, they're in their late seventies: they have other assets, but I literally have no idea how it would work in the event of care being needed in the future while the loan was outstanding. There are no other siblings to consider, and there's no bad feeling, I think its just something that was suggested to us and we agreed to without really thinking about the long term.
Even though its a loan to do work on the house, would a new bank consider lending so we can pay it back? Or would that be a form of equity release? Should we got to a broker? We obviously will be approaching people but I feel I need to figure out what is likely before we start discussing with professionals.