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Hilary and Stefan have an interest only mortgage of £95,000 with the Northwood Building Society on a property which is owned on a joint tenancy basis. A low cost endowment with profits policy is being used in order to repay the mortgage on redemption. It has 15 years to run and is currently projected to have a shortfall of £15,000 on maturity.
Six years ago, Hilary and Stefan took out a secured personal loan for £11,500 from Plumtree Finance in order to carry out some essential repair work to the house and fit a new bathroom suite. Repayments on the loan are £210 per month.
Stefan is employed as a full time technical helpdesk consultant earning £35,000 per annum. Hilary works as an operations manager for a large furniture manufacturer earning £25,000 per annum. They have three children, John aged 19, Paul aged 15 and George aged 13.
Four years ago their mortgage account fell into arrears as a result of Stefan becoming redundant from his job. However, he later found the job position he is currently in and arrears were eventually repaid.
Hilary and Stefan now wish to borrow a further advance from Northwood Building Society of £25,000 to finance an extension and further home improvements. They estimate that the work when complete will increase the property’s value to £160,000. They intend to make a contribution from savings of £4,000.
The lender’s maximum lending criteria is 3 times main income plus 1 times second income, or 2.5 times joint incomes. It also requires a mortgage indemnity guarantee where the loan exceeds 75% loan to value.
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