Secured loan on my house.

I have a £30,000 interest-only mortgage, and have about £170,000 equity in the house.

I would like to borrow a further £50,000 (secured against the house if necessary), but preferably not from a mortgage lender (for complicated reasons).

Would it genrally be easy to get a secured loan on the property for a comparable rate of interest to what a mortgage would have? If so, what (if any) disadvantages would such a loan have, compared to a mortgage?

Thank you,

Hank

Reply to
Hank
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In message , Hank writes

A secured loan is a mortgage. If you went to a secured lender, they would only be able to have a second mortgage as security. They would regard this as being less secure than having a first mortgage, therefore the interest rate will be higher.

Reply to
John Boyle

Come on, you knew we'd ask. What reasons? Can't be *that* complictaed!

Reply to
Ronald Raygun

Well, the house was converted to a couple of flats (without planning permission - many years ago, but after I got the existing mortgage). The reason I am reluctant to approach mortgage lenders, per se, is that I would fear a situation where one potential mortgage lender after another makes enquiries with local Planning Dept and comes back to me saying "Sorry, we can't accept your property as collateral, but here's a bill for our work to date" - possibly followed by a headache-inducing letter from the planning department.

I was guessing (wrongly perhaps) that a regular bank making a loan secured on the property would not be so particular, as long as there was obviously substantially more equity in the house than the loan being applied for.

If I could borow another £50,000 on the property, my total debt would be £80,000 - roughly, I guess, the value of the building plot alone without the house.

Thanks for the input. I am just about to disapprear for 48 hrs or so, but will check the ng on my return. Thanks again.

Hank

Reply to
Hank

Thank you for clarifying that.

Actually, my existing mortgage already has a higher-than-average APR because (a) it was a status-free mortgage and (b) is interest-only.

Thanks,

Hank

Reply to
Hank

In message , Hank writes

(a) would likely attract an increased rate but (b) wouldnt.

Reply to
John Boyle

In message , Hank writes

The new lender would make all the same enquiries and follow almost exactly the same procedure as a normal 'mortgage lender'. The problem will likely first come to light when the property is valued and the proporsed new mortgagee would either decline the loan at that stage (if it was a domestic mortgage lender) or the valuer would point it out and the absence of planning consent would turn up later.

Reply to
John Boyle

See? Told you it wouldn't be complicated. It's simple, you're stuffed. How long ago is "many years ago"? If it's long enough, i.e. more than (don't know, perhaps about) five years, they may not be able to refuse retrospective planning permission. Your best bet is probably to seek this permission sooner or later, or else you will in due course have trouble selling it. You'll probably need to get a building warrant too.

Will you lend me £10k secured on my car, without knowing whether I even have one, and how much it's worth? Of course you wouldn't. Even if you were to approach your existing mortgage lender for what's called a "further advance" (i.e. increasing the size of the existing loan), they would send a valuer round, who would tell them not only how much he thinks it's worth, but will give a very basic description. So it will include mention that it is in fact two flats. Whether the lender will notice, by comparing it with its previous records which say it was a single dwelling, is anyone's guess. So they may well be fine about it. On the othe hand, making such major alterations was probably agaist the terms of the loan, and again they could be fine about it, or they could hang you out to dry.

That's irrelevant. The value of the building can become negative (e.g. if there is major damage, such as from an explosion, rendering it structurally unsound and it has to be demolished, and if you're uninsured) and this would make the value of the site less than that of the ground.

Reply to
Ronald Raygun

Ok - thanks for the correction.

Hank

Reply to
Hank

That's interesting. Thanks.. Can you clarify what 'hanging me out to dry' might consist of, in a likely worst-case scenario?

IIRC, the terms of the mortgage is that I may not alter the building 'structurally' without the lender's agreement. When I did the conversion work, I didn't consider the alteration 'structural' (according to my understanding of the jargon) because I didn't remove or alter any of the existing structure. I simply fitted a kitchen upstairs and built an internal studwork wall to divide it into two flats. Everything I did could be ripped out in half a day, leaving the house just as it was before.

But in retrospect I'm not sure if the mortgage company's definition of the phrase 'structural alteration' is/was the same as mine!

Potentially, I believe I have increased the value of the property considerably, because the two flats, if sold separately, would be worth about 50% more than the house would be worth if I undid the conversion and renovation work and returned the house to it's previous state (an almost derelict 3-bed semi).

It has been 2 flats now for about 14 years (with separate council tax bills as evidence) and I'm told that getting a certificate of lawful use from the council would be a mere formality, due to the 'established use' rules. However, I have refrained from applying for it, because I am not 100% sure that doing so wouldn't invite beurocratic problems that I'm not aware of. Just carrying on as before seems safer, because it has worked fine for 14 years. My policy has always been to avoid involvement with beurocracy unless I have no choice, or am 100% certain I will profit from the encounter and it won't end up being a bigger headache than I can handle.

Hank

Reply to
Hank

They could terminate the loan agreement, which would mean you would have to repay all of the loan there and then. In practice, unless you happened to have the dosh lying around, it would have you running around like a madman trying unsuccessfully to find another lender. Soon you'd think loan sharks worth considering....

Reply to
Ronald Raygun

Without PP - and therefore without bulding control approval as well I guess.

Does this mean that you are in breach of the terms of your first mortgage ? If so, i think you are wise not to stimulate enquiries in case they terminate the existing loan.

it might be worth checking the validity of your buildings insurance also...

Robert

Reply to
Robert

In my experience thats not the case believe it or not

Reply to
uknewsfan

In my experience [of having done so once] it is. Bradford & Bingley, some 8 or 9 years ago. Further advance to help fund purchase of a yacht. I think in this case, though, they probably had a reson for wanting an accurate up-to-date valuation because their policy for such loans was not to exceed a 75% LTV, and on this occasion the extra borrowing took it to that limit.

It may well be that when there is no danger of such a limit being reached, they would dispense with the unnecessary expense. To their credit I should mention that they paid for the valuation, which I thought extrarordinary given how small the extra loan was. In fact, given how quickly I repaid the further advance, the interest they earned on it can't have exceeded the cost of the valuation by very much at all.

Reply to
Ronald Raygun

These days most lenders will apply an indexation factor to the original valuation and only send a valuer if :-

the indexed LTV exceeded a certain threshold,

the circumstances of the advance merited a revaluation, or

the further advance was to buy a yacht.

HTH

Reply to
John Boyle

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