Summary
We recently helped our customers remortgage their semi-detached home in Devon, near Newton Abbot and Exeter. They wanted to raise capital, but the lender needed to be comfortable both with the amount they wished to borrow and with the property’s planned home improvements.
We arranged a £360,000 remortgage with HSBC on a five-year fixed-rate product. This gave our customers the borrowing they needed and a product they were happy with.
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The Scenario
Our customers were homeowners aged 41 and 38. Both were employed, had good credit histories and had no liabilities. Their semi-detached property in Devon was valued at £450,000.
They wanted to remortgage and raise capital, with a total new mortgage of £360,000 over 25 years. The case notes do not give the balance of their existing mortgage, so the amount of additional capital raised cannot be stated separately. What mattered for the lender search was that the new mortgage needed to reach £360,000.
They also wanted a competitive product and chose a five-year fixed rate. With a fixed-rate mortgage, the rate is set for the initial product period, so the payments are more predictable during those five years.
The Home improvements was another part of the application we needed to account for. The lender had to be willing to accept the property as security for the mortgage, as well as lend the amount our customers required.
The Challenge
Finding a remortgage lender for the extension and capital raise
There were two main questions to resolve: could a lender offer the £360,000 mortgage, and would it accept the property with its extension? We also needed to find a product that was affordable for our customers.
- The capital raise: Our customers needed a total mortgage of £360,000. A lender had to assess the borrowing against their circumstances and the property’s value before confirming that the amount was available.
- The extension: The lender needed to be satisfied with the property being offered as security. We could not assume that a lender able to provide the loan amount would also accept the property without checking.
- The cost of the mortgage: Securing the requested amount was only part of the task. We also needed to consider the available fixed-rate product and whether the proposed payments were affordable for our customers.
The £360,000 mortgage represented 80% of the property’s £450,000 value. This is known as the loan-to-value, or LTV. It was an important figure when assessing the remortgage options, but it did not answer the property question on its own. Both the borrowing and the extension had to work with the same lender.
What We Did
We reviewed our customers’ circumstances, the property details and the total mortgage they needed. This gave us the information to assess the capital raise alongside the proposed 25-year term and their preference for a five-year fixed rate.
We then looked for a lender able to consider the £360,000 borrowing and accept the semi-detached property with its extension. Checking these points together was essential. A product could appear suitable on price, but it would not meet our customers’ needs if the lender could not offer the full amount or was not comfortable with the property.
HSBC was able to accept the extension and provide the mortgage amount required. We considered the product’s cost and affordability for our customers before arranging the remortgage on a five-year fixed rate.
This approach kept the focus on the actual purpose of the remortgage: raising the capital our customers needed through a mortgage that worked for their property and their finances.
The Solution
We arranged the residential remortgage with HSBC on the following basis:
- Property: Semi-detached home in Devon
- Property value: £450,000
- Total new mortgage: £360,000
- Loan-to-value: 80%
- Mortgage term: 25 years
- Initial product: Five-year fixed rate
HSBC could accept the extension and lend the amount required. The product also gave our customers a fixed rate for the first five years of the new mortgage.
Why the Solution Worked
- The required borrowing was available. HSBC could offer the £360,000 total mortgage our customers needed for the remortgage and capital raise.
- The property was acceptable to the lender. The extension did not prevent HSBC from considering the application.
- The figures worked together. The proposed mortgage was 80% of the property’s stated value, and we considered the loan amount and affordability as part of the same recommendation.
- The product met our customers’ preference. The five-year fixed rate gave them a set rate for the initial period on a product they were happy to take.
The Result
Our customers secured the HSBC remortgage and were able to raise the capital they needed. They were very happy with the product and with the fact that the required borrowing had been arranged.
The important result was that one lender could meet both parts of the case: accepting the property with its extension and providing the £360,000 mortgage. That allowed our customers to achieve their capital-raising objective through a residential remortgage.
What This Case Shows
When you remortgage to raise capital, the lender needs to assess more than the amount you want to borrow. The property itself must also meet its requirements. In this Chudleigh case, the extension made it particularly important to check property acceptance alongside the loan amount.
An extension does not necessarily prevent a remortgage, but lenders may assess property details differently. If you want to raise capital against a property that has been extended, it is worth discussing the full details with a mortgage adviser before choosing a product.
Need Help with a Capital-Raising Remortgage?
If you want to remortgage and raise capital, Kerr & Watson can review your borrowing needs, property details and affordability, then look at suitable remortgage options.
If your home has an extension or another feature you are unsure a lender will accept, contact Kerr & Watson. We can assess the details of your case and explain the options that may be available.
