I'm new to this mortage thing!Why do some lenders only let u borrow up to a certain percentage...?

Question

on what the house is worth. Do you have to borrow the rest & also can u borrow more than the house value & pay off other debts?

Thanks

Answer 1

You should never borrow more or even 100% of what your house is actually worth. This is a ploy that some lenders try to sell you when you get a mortgage, telling you you can "cash out" equity in your house and pay off other bills--but the problem is, if you end up having to sell your house before you thought you would, you'll have to pay off a mortgage that is more than the house will SELL FOR.

This is a VERY BAD THING. This is how people lose their homes.

They mortgage it too high, the payments get too high, then they have to sell (or they have to sell for other reasons) and they find out they can't.

Never borrow more than your house is appraised for. And don't rely on the appraisals that LENDERS do--they're always inflated--sometimes a great deal.  That is so they can sell you a higher-interest or higher-payment mortgage.

Don't fall for this trap. Stick with the mortgage you bought the house for, and don't refinance if you can help it, unless you can get the SAME amount of mortgage for a at least a 2% lower rate. (usually not in the first two years.)  Make your payments on time and don't try borrowing on your house as an investment unless you've been in it for at least 5 years or more.

And never EVER borrow MORE than your house is worth!!

Answer 2

you can borrow more than the house is worth with an unsecured loan

Answer 3

You are only able to borrow a percentage for two reasons.

the first is so that if you default and the bank has to take possession and sell your house then they still want to get their money back!

the second is that saving up a deposit shows that you have financila managment skills and are less likely to default.