Mortgage/Loan for house renovation

chunkylover

hi,

I'm currently in the process of buying a house to renovate and then re-sell, I need a loan/mortgage for a short period of time which I can pay interest only on the loan with no penalties for paying back early.

The house purchase price is £100k of which I intend putting £30k of my own money towards. The loan would be required for a period of approx 6 months assuming all goes well. :question:

The banks i've spoken to are trying to get me into buy-to-let mortgages which have penatlies for early re-payments.


Any help or advice will be greatly appreciated

herbiesjp

There will be many schemes, BTL or not, that will have no Early Repayment Charges.

bingo_2

The main problem may be that "residential mortgages" are only for "your sole and main residence".
If this house is going to be additional to the one you already own, and is just a renovation project, then the problem starts there.

If you "intend to buy this house, renovate, live in it, and sell the other one" then it now becomes your intended residence and the lender can now play ball.

However, another problem now arises .... lenders mortgage conditons, enforced by the conveyancing solicitor, state that any mortgages on existing property must be redeemed before completion of this new mortgage.

Except, that is for Intelligent Finance.

They will allow the solicitor to complete on the new mortgage, provided it is your intention to sell the old property within 3 months, and are actively pursuing this course i.e on the market with an agent, or selling privately ?
Intelligent Finance also have trackers that have no redemption penalties at any time.
Found this on a mortgage brokers web site that may help you:

*One very important point that has not been well publicised is that Intelligent Finance have a clause on their mortgage offer as follows:

"You must repay, on or before the date you enter into the (Intelligent Finance) mortgage, all mortgages on any property you are selling. The three exceptions to this requirement are:

where you are unconditionally bound to sell the other property and its proceeds will be enough to discharge your mortgages on any property being sold (in which case, you must be bound to complete the sale within three months of entering into our mortgage);

where you have told us that the mortgage is not to be repaid and we have agreed to this; or

where the property is to be mortgaged in Scotland (in which case, any existing mortgage must be repaid within three months of our mortgage).

Having checked with Intelligent Finance what the first exception actually means, they say that as long as the sale on the existing property is being actively pursued (and this could obviously be checked by your solicitor, with a phone call to your estate agent, or simply asking you to confirm it verbally, especially if you are selling privately), then the solicitor can exchange contracts and complete your new purchase (or additional purchase, in this case) without you having to redeem your existing mortgage.

Having checked with Intelligent Finance what would happen if the existing mortgage is not redeemed within three months, they say that they "monitor the situation" (which means that they keep an eye on the Intelligent Finance mortgage account, to see if it starts to go into arrears).

This exception to the requirement to redeem existing mortgages before completing on a new one, is I believe, unique and is probably the cheapest "bridging finance" you will be able to find.

The other route worth exploring is the "let to buy" option.
If "it is your intention to let your existing property, and buy another to live in yourself, then as long as the existing property can be let out to cover any mortgage payments (confirmable by reference to a letting agents letter stating the marketable rent potential) then some lenders will play ball - NatWest for a starter.

Of course if you have no mortgage at all on the existing property, you can ignore all the above and simply attack the project based on your intention live in it yourself when the work is finished, (to satisfy the "prime residency rules)

I'm not suggesting for one minute that you mislead anyone, but if you can imagine just how wonderful this house will look when renovated, who wouldn't want to go and live in it themselves and get shot of the old one when all the work is finished.

Finally, the tax man may decide you are trading in houses and want his share, in the form of capital gains tax, unless of course, the property IS your sole and prime main residence and the other one is just a bit slow selling.

Hope this helps.

Newbird

Why not just re-mortgage your own house to give you a 'loan'? Thats if it is currently mortgaged of course! and you can afford the new re-payments.

Your current mortgaged property would have to be valued at over the amount you wish to borrow and don't forget to minus your current outstanding mortgage.

You are not taking out a NEW mortgage, just revising your existing one. Ther will prob be some admin fees to do this tho, but not that much and it may solve your problem.

If your current property is not mortgaged...errm...back to the drawing board!