Releasing equity/re-mortgaging

HI all.
We are looking at releasing some equity from our house. We have it over 3 years and have had it revalued recently.
In this time it has over doubled in value, down to market and a whole lot of hard work/refurbishment on our part. What we would like to do is release a good chunk of this money ( about a third of the increase value).

We are on a fixed 5yr, so I know we will have a 'get out fee'( 1.5yr left).
We would like to release around 80k for more building work, serious holiday and a wedding. This is our first house, so we really struck it lucky but now we need to know how to go about releasing the money and what we should be looking out for.. as finance newbies.

Any one got any pointers?
Also what should we be telling the bank that we want to cash for?
We were thinking of re-fixing to another 5yr.

Thanks
M.

Hi Milkman,

Rather than breaking your existing fixed rate (and incurring the penalty) you should ask your lender about a top up loan. Most will be happy to lend, assuming your income is sufficient, for the purposes you've given. Depending on your lender the costs should not be significant and a top up tends to be issued faster than a full remortgage.

Sarah

www.rea.ie

milkman said:

serious holiday and a wedding

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Are you really sure you want to be paying for your holiday & wedding with interest over 20+ years?

Rainyday - are you "sure" they are going to be in this house, with this mortgage for 20+ years? I don't know what the stats are here but I recall from the UK that the average 'stay' in the first house was 5-7 years.....

Sarah

www.rea.ie

I remember it being something like 8 years here but that included transferring to another house/mortgage and not necessarily just people who cleared their mortgages after 8 years and well before term! I think that the point about avoiding consolidating what should be short/medium term expenses/debts onto the full term of a mortgage is a prudent one and, where possible, such top-ups should be scheduled over a similar term to a personal or similar loan for the same purpose.

Guys,
thanks for the advise. We would be looking to sell within 2years, 3 max.

I hear what you are saying about paying the interest for another 20 years. The house has increase in value so much that we would like to use some of this equity, but we had agreed not to release more that 1/3 of the increase, to be safe.

We will have to break the agreement because part of the cash will be used to go travelling for about 9 months after the wedding. With this in mind, we would be away when the 5 year fixed is up. If we change now/soon to an other 5yr fixed there would be a considerable drop in interest (I think from 5.3% to 3.75%). I think the penalty would be around €6k.
We would be looking for about 80k to do more building work, wedding and then travel. I suppose we could get the money in stages as we wont need the bulk of it for 7months. However I have no idea as to how to approach this. Do we just say that the money is for building and wedding. Is there likely to be an issue if we tell them that some of it is to travel on?

What is the difference between a top up loan and a remortgage? Would the top up loan be at the mortage interest rate, or standard loan rates?

I greatly appreciate all the advise.

thanks guys.

M.

The "new" rates for five year money are 4.29% from IIB and PTSB - the former might suit you as they offer a interest only period for up to 36 months during the term of the mortgage - this might come in handy for whilst you are travelling. A top up loan is an additional loan from your existing lender which is normally charged at their standard variable rate. A remortgage means transferring the existing mortgage to a new lender for the full amount (i.e. including the extra funds). Ulster Bank and the EBS both offer fees free switcher mortgages where they will pay all (if you fit the criteria) the costs involved in switching - legal fees, legal outlays and valuation (but not your redemption penalty )

Sarah

www..rea.ie

Sarah W said:

Rainyday - are you "sure" they are going to be in this house, with this mortgage for 20+ years? I don't know what the stats are here but I recall from the UK that the average 'stay' in the first house was 5-7 years.....

Sarah

www.rea.ie

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Hi Sarah - I don't see the relevance of the duration of their stay in the house. If they do move house, then presumably they will be buying another house and will be transferring their outstanding mortgage debt onto the new house.

The real issue is about paying for short term requirements (holiday, wedding) over long term debt. While the mortgage is undoubtedly the lowest interest rate available, they could find that they are paying high overall interest charges given the duration of the loan.

milkman said:

... 3 years ...
In this time it has over doubled in value...
...would like to do is release a good chunk of this money ( about a third of the increase value).
We would like to release around 80k for

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Interesting ...
so if i got it right, you paid around €240k for your house 3 years ago, and now it is worth around €480k..
Do you mind me asking where this house is located, the type and the # of bedroms?
Thanks

Bacchus,

very nearly spot on!
Bought just over 3 years ago for 210, put about 25 into it and have done a huge amount of work refurbishing since, most of it ourselves, but got in propper trades for skilled work.
In D3, 3 bed cottage on 3 half floors.
Still some tidy up work to do but at present (and without our proposed extra building) has been valued 485 (average of 3 estate agents).
1400sq ft with 40ft west facing gdn.

Rainy Day/Sarah,

If we intend selling in say 3 years, would we not be paying off that mortgage and opening a new one for the next house?
Surely because the mortgage would be paid off the interst would not be paid for the full 20 year term, and only fot he time that we actually had the money? there fore we would be apying the interst on the 80k only for 3 years, not 20?

Am I right in thinking this?

Tnx.
M.

You are but Rainyday is also right - you've effectively spent some of your equity on a short term project (the holiday I mean, hopefully not the marriage ). But it would be financially crippling to borrow €80,000 on a short term unsecured basis; assuming you could get it in the first place. Who is your current mortgage with?

Sarah

www.rea.ie

Sarah,
Thanks for interst and help with this, much appreciated. I am such a newbee at this finance stuff!
We are currently with PermanetTSB. Holiday would be more a 9month extended honeymoon.
As you can see we are still at the 'how feasible is this' stage.

For loan purposes, assuming we sell/pay off mortgage in the next three years, then I had thought that the cheapest way to borrow the money was on the mortgage. But it is obviously not as simple as that.

If positions were switched, how do you think you would go about it?

M.

No, actually I think it is the best way to finance that sum of money and given that you'd incur legal fees on a top up with PTSB you'd be as well looking at a full remortgage. How do you intend paying the mortgage while you are away? Are you both taking career breaks or will you be leaving your jobs?

Sarah

www.rea.ie

Sarah,

fiance would take career break, and walk straight back in. I'll be leaving my job. We have budgeted that it will take me 3months to get a new job(worst case senario but best to be prepared).
When away a couple of friends will move into the house, so they'll pay mortage when we are gone and look after anything that crops up(we'll leave a slush fund just in case).

We found PTSB to be very helpful whenever we have had to approach them, and were going to stay with them. But we havnt looked into any of the fees/ alternatives from other providers.

C.

BTW

one salary will not put is in a harmful/exposed position.
We would still be able to manage OK.

C.

I agree with Sarah that, if you are going to proceed with this borrowing, the best way to do it is on your mortgage. However, I think you're kidding yourself when you say that you'll be paying it off when you upgrade your house in a few years. Technically, you may end up paying off your current mortgage, but you'll be replacing that with another mortgage. And that new mortgage will include the borrowings for your time off, so you will really be paying for your holiday over a very long term.