Can we borrow another £50,000 to complete renovations and for me to take time out to have a baby?

Posted on 7 January 2008

Dear Katie,

We own a bungalow valued between £350,000 - £400,000, with a mortgage of £190,000. We wish to borrow another £50,000 to complete renovations and for me to take time out to have a baby without worrying about mortgage payments. The problem is i am not working and my husband's salary is only £19,500. If they take 4 or 5 times his salary we would not get the mortgage. Is there a way around this as we have a lot of equity in the property? Please help.

Hello Nadine,

I'm glad you've written as you have a very common problem.  Lots of people have a lot of equity in their properties now, but their incomes may not have grown at the same rate.  There are two important things to a lender, one is the asset (how much equity you have spare) and the other is the affordability (will you make the monthly payments).

As you so rightly say, your equity is fine, however it is your affordability that stops you.  I would say that you are already overstretched with a mortgage of £190,000 on an income of £19,500.  This is ten times income, and if someone took a loan of that size now, whichever lender allowed it, would be the front page of most news papers the next day.

You say you want to take time out, but that you are not working.  Normally, a lender cannot penalise you for being on maternity leave, and full income for the mother continues to be taken into account.  Your issue is not that you want to have a baby, it's that you're not working at the moment which means that your household income is already too low for the mortgage size you want.
 
I'm sorry to say that it looks like the only way your property is going to be the source of income that you need, would be for you to sell it now, and move into something smaller that you can afford with only one of you working. An alternative might be to ask if a friend would like to buy an eighth of the property.
 
Best of luck.

Category: Special circumstances

 

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