auction - buying first... mortgage later... any advice?

karie

Hello,

I'm hoping someone in the know can provide some advice.

We are hoping to buy a house that will be sold at auction very soon.

The house is currently reasonably habitable (has kitchen, bathroom, etc) but could do with a bit of work to improve it. That's sort of stage one - stage two would be to convert a large garage area into extra living space. We hope to do stage one straight away, and convert the garage area over time.

We are contemplating remortgaging a different property with low LTV (approx 30-40%) and then buying this new property with the funds released (aswell as savings), doing it up so that it is in a better state, and then looking to take out a mortgage on it.
One of the reasons for doing this is that we would be more confident in being able to complete within 28 days (as per terms of the auction).

In theory this seems reasonably logical in my head, but I am wondering about a few things:

- would the building society (Nationwide in this case) charge a fee to release the funds (approx 100-120k) (we have looked into ERCs, and it wouldnt be an issue to re-pay the funds released, but I'm not sure about the actual initial release of funds)
- would a bank be likely to be happy to provide us with a mortgage for the second property even though we essentially would originally have bought it with cash?
- if a bank did agree to lend to us, how would that physically work? e.g. when you remortgage from alliance and leicester to hsbc, the funds go from hsbc to a&l via the solicitors. in this case, would the bank we get a mortgage with send the funds to our solicitors so that we could then essentially use this cash to buy the equity in the first property back?

would be grateful for any advice!!!

p.s. the second property wouldn't be a btl, it would be our main home

Robert_Sterling_3

I think I will pass on this one.

getmore4less

Having the funds available is a sensible option.

A remotgage to an offset could be a good choice maximm flexabiliy

1. Draw down when needed( including the building work if needed)

2, If you don't get the house
a.you don't draw down so funds costing money
b no risk the loan tming out if it takes to long to find another place

3. No need to remortgage the new place and incur more costs, look for a portable offset if you really want the mortgage on the new place eventualy.


To answer the questions,

normal extra lendig fees wil apply and it will be on current deals

you can mortgage a house with no mortgage on it.

you should be able to have the money sent where you like(for the extended borrowing and the new loan). The reason remortgages go via the solicitor is part of the process is redeaming the existing debts.

karie

Hi getmore4less,

thank you very much for replying. i am very glad you think this sounds sensible as i was starting to think it may not be possible.

good tip about the offset, however we would prefer to keep the 2 finances separate in the long-term so would like to get a separate mortgage for the new property.

getmore4less wrote: »

normal extra lendig fees wil apply and it will be on current deals

can you just clarify - this means that we would keep the existing rate etc? (this would be really important)

getmore4less wrote: »

you can mortgage a house with no mortgage on it.

do you know if only certain lenders do this?

thank you!

getmore4less

The last thing you want if buying at auction is no funds, and not getting a loan in time.

Nationwide additional borrowing offers,

http://www.nationwide.co.uk/mortgage/additionalborrowing/default.htm

Existing debt should stay on the current deal.

I would check they allow capital raising for a buying another house they do say

"It can be used for improving your home, a new car, a holiday or to replace loans and credit cards. The only thing we can't finance is for capital raising like starting up a new business."

Allthough improving your home could include getting a better one.

No idea on the list of lenders that will only lend on new/move purchases.