Remortgage question
Discussion
DanL said:
his is legal because you're just releasing equity. That would also not be a problem for the business case above.
The reason that they're on sticky ground is that they're asking for more funds, which in return will result in an increase in the value of the house. So, the lender is lending against an asset that will be worth more once work completes. If they don't do the work, they've misrepresented their application, and (I assume) obtained funds by deception or however the law would describe the fraud.
If the chap said "my house is worth £600k, my mortgage is only £150k and I'd like to increase this to £200k free up £50k to expand my business" then assuming LTV and affordability criteria are met then I can't see the back having an issue.
This is different to house worth £600k, mortgage of £550k, and asking for £50k to extend to give a house worth £700k afterwards. The LTV the bank work on is, I imagine, the LTV of the property after the extension. As the house gets no extension and is till only worth £600k, the bank would be in a much different position to where they expected to be.
I'm sure the numbers are different, but the principle is as above.
Probably an utterly pointless question, but what's to say any works would necessarily result in an appreciation of the asset to the value of the sum borrowed?The reason that they're on sticky ground is that they're asking for more funds, which in return will result in an increase in the value of the house. So, the lender is lending against an asset that will be worth more once work completes. If they don't do the work, they've misrepresented their application, and (I assume) obtained funds by deception or however the law would describe the fraud.
If the chap said "my house is worth £600k, my mortgage is only £150k and I'd like to increase this to £200k free up £50k to expand my business" then assuming LTV and affordability criteria are met then I can't see the back having an issue.
This is different to house worth £600k, mortgage of £550k, and asking for £50k to extend to give a house worth £700k afterwards. The LTV the bank work on is, I imagine, the LTV of the property after the extension. As the house gets no extension and is till only worth £600k, the bank would be in a much different position to where they expected to be.
I'm sure the numbers are different, but the principle is as above.
You could tell the bank you're building an extension and then decide that this extension is actually going to be a 1m by 10m long corridor, going upwards, because you just fancy something different. Would the bank ask/expect to see plans to make sure that this £50k lump sum is going to have a commensurate effect on the value of the mortgaged property?
Perhaps more simply you could spunk £50k up the wall on a dodgy builder who ends up not finishing the work at all, possibly resulting in a negative effect on the property value?
Appreciate this is entirely academic, but curious
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