Can I raise money when my fixed rate ends to repay my parents, who helped me buy my first home?

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Can I raise money when my fixed rate ends to repay my parents, who helped me buy my first home?

27/04/2023

This is quite an unusual scenario, but one that I faced this week.

One of my returning clients I helped buy their first home two years ago have done quite a lot of work to their home, paid off some of their mortgage and now have enough equity to repay their parents who helped them with a gifted deposit.

To be clear, they don’t need to do this. They just wanted to say thank you to their parents who helped them get on the property ladder.

Two years ago, they bought their first home with a 2 year fixed rate mortgage from NatWest. After I contacted them 6 months before the fixed rate was to come to an end they asked if it was possible for them to raise the money.

In the first instance we had a look at what products are available and the usual suspects were all able to help, Nationwide, Virgin, Halifax etc. We also went back to NatWest to see what they could offer.

The benefit of looking at other lenders is that we may be able to use a higher value for the property which reflects the improvements they have made to the property. The negatives include further underwriting and the use of solicitors to transfer the mortgage from one lender to another, and having to organised a survey on the property to ascertain its true value.

The benefit of staying with NatWest is that have an automated valuation of the property which is available instantly. They already have authenticated their ID and proof of address, so there is less underwriting required. Their income and expenditure will still need to be assessed as they are looking for more money. The negative is that if they disagree with the valuation NatWest have provided, they would have to appeal this. NatWest also have a reduced amount of products and in this scenario were unable to offer a 3 year fixed rate, or anything longer than a 5 year fixed rate. Luckily the client wanted a 5 year fixed rate so this wasn’t an issue.

Surprisingly to me, NatWest were their cheapest option. From my experience, your existing lender doesn’t always offer the cheapest product and from a financial viewpoint, it often makes sense to change lenders.

We approached NatWest to make sure they were happy with the scenario and what documentation they required. They were happy and asked for nothing more than the usual 3 months payslips and 3 months bank statements.

My client is very happy as they get to stick with their existing lender, they have been offered the cheapest product available to them, it was all arranged before their 2 year fixed rate came to an end meaning they didn’t have to go on to a high variable rate, no surveyors were needed and no solicitors needed to be involved.