How to release equity? Is it applicable to me?

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pator

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Hi not sure what the best forum for this is, but here goes.

Have approx €150k equity in the house
Is it hard to release equity do you need to show reasons why etc?
Am public sector permanent employee, now the scary bit --
--> the reason I want the equity is cause in Sept 08 hoping to go back to full time study for two full years. My job would be secure and I would be guaranteed it on my return.

Is this a complete pipe dream way of finacing it? Am looking at all possible options now to try ensure am ready to start in Sept next.
 
pator said:
Have approx €150k equity in the house
Is it hard to release equity do you need to show reasons why etc?
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Is it hard? Depends on your circumstances. How much is the house worth and what is left on the mortgage (capital amount and term)?
Am public sector permanent employee, now the scary bit --
--> the reason I want the equity is cause in Sept 08 hoping to go back to full time study for two full years. My job would be secure and I would be guaranteed it on my return.
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A lender will be interested in how you are going to service the loan while studying full time.
Is this a complete pipe dream way of finacing it? Am looking at all possible options now to try ensure am ready to start in Sept next.
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If you do remortgage to cover your costs for the two years then be aware that paying the topup off over the remainder of your mortgage term may make this credit expensive in the long run. If possible remortgages for certain things (e.g. debt consolidation, holidays, cars, new kitchen, and maybe education costs) should ideally be cleared in a few years rather than a few decades if possible.
 
Do you qualify for the additional monthly repayment taking your current financial commitments into account based on your current salary.

If not its unlikely a lender will approve a further loan.

If you do then its a good idea to take the equity over the shortest term possible to lessen the effects of the additional interest which will be added on to the mortgage.
 


Yes I would qualify based on my current salary,
but obviously I would not then have a salary for two years.

that then goes to Clubman's question basically I would be hoping to use some of the equity release to service the loan for two years - will the bank completely laugh at this ?? Will the fact that I have a guaranteed job to go back to cover me?

I am thinking that €65k should cover everything for the two years but don't know if it feasable to get a loan for that amount other than through an equity release. If I get an ordinary loan then I am looking at continuing the mortgage payments and having loan repayments (essentially using part of the loan to pay back the loan and the mortgage !)
I would have some small income from other short term work but all of that would only amount to approx 70% of the mortgage payment forgetting about all other expenses for the year

Just to note in case this is begining to sound like a basket case I have traditionally being financially prudent, never had a big loan other than mortgage, usually tried to borrow less than half of purchase price of car, have allways paid off credit card in full, saved the max amount on ssia(deposit) and still have the lump sum.
 
People take equity from their homes for far less reasons than a permanent professional with a guaranteed (?) job taking time off work for educational purposes.

Obviously can't say whether or not your lender will give you approval for the full amount you're looking for but from what you've said in your posts I wouldn't have thought it would be a flat refusal either. Is there a family member who would act as a guarantor if necessary.

Would also think this might be better to organise while in your job.

Bear in mind additional costs like increased life/fire cover to cover the additional mortgage also.
 
One idea which might suit you would be to switch your mortgage to First Active's Offset Mortgage and apply for a facility of the equity release. That way, you will have the funds you need sitting in the Offset Account, without having to account for why you need them. But you won't be charged interest on them until you actually draw on them.

Liam D. Ferguson
www.ferga.com
 
pator said:
that then goes to Clubman's question basically I would be hoping to use some of the equity release to service the loan for two years - will the bank completely laugh at this ?? Will the fact that I have a guaranteed job to go back to cover me?
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This idea of topping up the mortgage to pay back the mortgage makes no sense to me. Maybe I don't understand it or something. I wonder if a better option might be to see if they will give you a 2 year repayment break or even 2 year interest only period or something like that? Will you have any money saved at all to cover expenses during the 2 years?
I am thinking that €65k should cover everything for the two years but don't know if it feasable to get a loan for that amount other than through an equity release.
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You still haven't posted details such as your original and outstanding mortgage amount/term, your house value etc.
I would have some small income from other short term work but all of that would only amount to approx 70% of the mortgage payment forgetting about all other expenses for the year
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Would it cover interest only repayments on the mortgage perhaps? Switching to interest only and thus stalling the reduction of the capital balance may have implications for your mortgage protection life assurance if it is decreasing term (e.g. you may need additional or alternative cover).
 
Unlikely to get a 2 yr repayment break and interest only is not as cheap as some people think especially if the mortgage is anywhere in the early years. I dont think its mad to borrow the extra needed to pay the payments but I would be more inclined to not tell the lender the real reason, 'home improvements' covers a multitude. Too much honesty sometimes doesnt work as no matter how supportive your local lender person may be, head office policies dictate. FA offset would work but you could also go for a straighforward tracker, probably better rate, lodge the portion you didnt need straight away back into mortgage and hold it as an overpayment that you can draw on again. You will only pay interest on net balance.
 
agapanthus said:
Unlikely to get a 2 yr repayment break and interest only is not as cheap as some people think
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Just to clarify - I never suggested that it was cheap. Obviously somebody considering this approach should calculate the knock-on effect on overall mortgage cost of no reduction in the capital balance during the interest only period when deciding whether or not it may be appropriate (if possible at all).
 
Thanks for all the very helpfull stuff to date.

Liam would you mind explaning a little bit more about how you think the offset would work in my situation. Sounds like it could be an option. At moment have ecb + 1.1 tracker.

I think the most I could hope for is a six month break from mortgage repayments.

I appreciate it seems strange to use loan to make some of the early repayments but if it allows me to do the course.
Appreciate extra payments and would try to get top up over shortest time period possible, but if this allows me to do something I really want to do then I am prepared to taken "hits" that I normally wouldn't.

In terms of not telling the bank what it is for - is this dodgy, as they will be easily able to see when I am not getting a monthly income.

Agapanthus your idea of getting money using as overpaymeny and draw down when necessary sounds very good, how does this work in practice?

Clubman hadn't thought interest only would be possible will defo look into that as well.


Have been looking at figures all morning and have some further ideas:
I reckon I can get through the first year, including the mortgage repayments, with savings. This would leave pratically no savings left and raindy day fund down to about €4k.
Then for the second year if I could get a loan/top up and maybe put the mortgage on hold for 6 months (not confirmed that I can get the 6 months)

Presumably I need to sort out the loan/top up prior to start of the first year when I still have an income.

That would leave me would very little savings left but not with a huge amount of extra debt and if I could manage something like Agananthus mentioned then need only draw down money when needed so if possible during the second year and so only using the top up to pay itself and mortgage back for a short period of time.

Any comments or further thoughts would be great. Thanks again.
 

While have to advise in telling the truth, the lender will not usually follow up on what you said the funds were for unless perhaps planning permission was required etc or another reason may be that they request invoices to be submitted for works you claim to be carrying out.

Once you get approval and drawdown your top up within the specified time (on the terms and conditions of the offer) and keep repayments up to date the the lender will not look into how you are servicing your repayments. They won't check your details once they have given approval for a top up and you have drawndown.

Which is why I would think it is more advisable to sort out your top up while still working and have your savings intact. Applying when you are not working will not act in your favour as the lender will see that you do not have a monthly income and will question more your ability to make repayments.

You could look at reversing your idea above ie take the top up for your first year and use your savings for the second year.

During the second year you could then look at taking a moratorium e.g. three months payment break which would make the second year easier for you financially. This would have to be agreed with your lender but if your repayment history is clean and up to date it should be relatively easy to obtain.

Doing it this way is only advisable if you are definitely returning to your job and budget knowing that your income will cover repayments from a set date.


The Offset seems a clearer plan.
 
The reason I was using savngs in the first year was so that I wouldn't draw down the extra money (hopefully have the got the approved before starting course) until the last necessary moment thereby not paying for it for very long when I wouldn't have an income and maybe only drawing down as much as necessary. Does this make sense

When you say an offset might be clearer do you mean switch to something like first active's offset mortage?

I am not sure I understand how this would work in my circumstances,

do you mean get the top up and also lodge all of my current savings to that account and work from that for the two years?
 
Regarding the offset option, lets say your existing mortgage is 100k and you need an extra 50k, you apply for an offset mtg of 150k, draw it down and lodge back 50k of it into an account linked to the mortgage. What that means is that you will then only be charged interest on the difference between the loan and the savings i.e. 150 - 50 = 100k. So you would only be charged interest on 50k but you would be paying the repayments on 150k. Alternatively you need only draw down the 100k initially and draw the pre approved 50k as you need it. Either way you will need life cover for the full amount 150k. Rate is ECB + 1.15%. Other option is DIY offset, take out tracker mortgage, rate probably lower depending on loan to value, borrow 150k, lodge back in 50k as an ordinary repayment, this is very important because if you lodge it as a lump sum then it is gone and you cant get it back, however if it is just showing as an overpayment you can get it back as you need it. Offset is probably more clear cut way of doing it. Arrange it all before you stop working, only making life difficult trying to borrow without an income, makes banks nervous. Again I would be slow to be completely truthful, half of it in home improvements maybe!
 
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