How to get a new mortgage?

JonnyNoJags

Hi all, this is my first post, so please be gentle!

We bought a house (3 years ago) to do up for £160k on a 95% LTV morgage and then spent £50k renovating it. It's current value is around £290k, but still requires some finishing (say £4k's worth of work to push value up over £300k) off which we can't afford to do. My income is £2700 +OH's £400 net pcm and all our outgoings are just under £3000 pcm, so we aren't going down each month, just staying afloat!

The problem is our mortgage is £150k, but our debts are £80k on 3 loans and 4 credit cards (low rate or 0% tarting) and no one will give us a new, larger mortgage as we have these debts. I have tried to explain that we will pay the debts off with the new mortgage, but we just get refused. To me it seems a Catch 22 situation, so any advice would be great, thanks!

fairylights_2

perhaps the key to your problem is not to get more credit but to find the money from what you're spending every month. Try filling in the budget planner and working out where you can cut back in your spending. If you really only need £4k, and between you bring in £3k per month, it should be easy to find that money over the course of a few months with some rigid budgeting and planning. If we could find £300 a month from £1500, it must be possible!

If you feel comfortable to post your incomings and outgoings here, people will be able to suggest ways around it, as you can see from other posts.

grumbler

JonnyNoJags wrote:

...to push value up over £300k...

Are you going to sell the house?:think: If not, all your efforts to 'push the value' at any cost will result only in extra expences for you related to renovation now and higher mortgage payments later. £240K mortgage will cost you about £12K p.a. only in interest :eek: . Monthly payments on 25 years mortgage with 5% rate will be £1400.

Xbigman

Yes it is a catch 22 situation. But you need to finish this and get that property on the market. As already pointed out interest running at 12k is serious. If you delay 4 months you will have paid out 4k for nothing anyway. This is a scenario where you need to see the big picture. You must do anything you have to in order to finish that property within the month, then get it on the market for the spring/summer housing rush.

Have you got a car? then sell it. Have you any other assets you could sell? Credit cards you can put 4k on? Take out a crap loan (extra interest on that compared to interest saved makes it immaterial). Relatives with money or credit available? (if you go down that route then get the house valued to make sure they are safe lending you the cash).
Last and least advisable, have the work done and stall the tradesmen on payment for a few months. As long as they get their money in the end they will be OK. This happens all the time in the building industry.

Others please note. I give this advice ONLY in the circumstances the OP outlined. Never do this to cover general debts.
Regards



X

silvercar

current value is around £290k, but still requires some finishing (say £4k's worth of work to push value up over £300k) off which we can't afford to do.

Why not market the property now at £290k? £300k may be seen as a psychological barrier to buyers. In theory, spending £4k to gain £10k makes sense but (a) you may not get the offer you want, (b) the time you take to do the work and get the property on the market is costing you.

grumbler

Xbigman wrote:

...you need to finish this and get that property on the market. ...You must do anything you have to in order to finish that property within the month, then get it on the market for the spring/summer housing rush....

I cannot find anything in the original post indicating that JonnyNoJags is going to sell the house. In my understending they want to 'push the value' in order to remortgage the house with new - as large as possible - mortgage and use part of it to pay debts ...

JonnyNoJags

grumbler wrote:

I cannot find anything in the original post indicating that JonnyNoJags is going to sell the house. In my understending they want to 'push the value' in order to remortgage the house with new - as large as possible - mortgage and use part of it to pay debts ...

Yes, thanks Grumbler you're correct, I don't want to sell the house. My spending isn't a problem, it's the level of short-term debt. The problem is mortgage lenders will only lend against the purchase price of a property so we had to borrow money on loans/credit cards to renovate it and now can't put it on the mortgage because they take into consideration your level of debts when giving a mortgage quote!

What I'd like to know from you good people here is:

a. Can I borrow £225k on a £48k salary and OH's £4k eBay income
b. What should/shouldn't I say to an IFA in order to get the mortgage
c. Any ideas on a good mortgage lender (or ones to avoid).

BobProperty

Xbigman wrote:

... and stall the tradesmen on payment for a few months. As long as they get their money in the end they will be OK. This happens all the time in the building industry....

X

Thanks a bunch. I'm a "tradesperson" owed £xxxx by other tradespersons and customers and trying to put off tradesmen on payment when they are probably running overdrafts is hardly fair. They also might have clauses in their contracts to the effect that the goods aren't his until paid for in full. How well is his house going to value up if the builder starts taking out the radiators and kitchen appliances? And that's just one of the legal ways of the builder getting his own back, you don't want to know about the illegal ones. And it doesn't "happen all the time in the building industry".

OP - I don't understand quite what you are trying to achieve. To remortgage this property at £225k without difficulty would rely on it being worth £300k (75% LTV self cert probably). If you are going to get a re-mortgage then I suggest you get the property re-valued soon, get the figure and go from there. If the market is getting a bit quiet where you are, who is to say that your figures are currently accurate?
Can you delay finishing parts of the house?
Otherwise fairylights has the best suggestion so far.

JonnyNoJags

BobProperty wrote:

...OP - I don't understand quite what you are trying to achieve. To remortgage this property at £225k without difficulty would rely on it being worth £300k (75% LTV self cert probably). If you are going to get a re-mortgage then I suggest you get the property re-valued soon, get the figure and go from there. If the market is getting a bit quiet where you are, who is to say that your figures are currently accurate?
Can you delay finishing parts of the house?
Otherwise fairylights has the best suggestion so far.

Ahhh, thanks BobProperty that's a very good point. If I ask a local estate agent to value the property and they say £300k or more then I can get a non-status mortgage for the full amount required. The only problem it isn't quite finished which might reduce the value.

BobProperty

Can we just get a few things straight here, please. Are you living in this property and for what reason was it purchased? I am concerned that you are over-reliant on re-mortgaging it to clear your debts. I think you need a realistic value of the property now, and with that information you can see whether a re-mortgage is worthwhile as part of a review of your financial situation.