Two mortgages query, and auction purchase

AdviceSeeker_3

Dear all,

Thanks for the wealth of info on here and I'm hoping you might be able to offer some good insights on our situation. The scenario is as follows.

House 1 (our existing home) has a value of around £300k (allowing for recent market falls), and we have a very low mortgage remaining on it (sub £1000) on the Nationwide BMR. I have called NW and apparently we could borrow back overpayments of around £65,000 from the NW at the 2.5% BMR if necessary.

House 2 is an auction property that we are interested in. As such we would obviously have to go ahead without selling house 1 (the plan being to then try and get shut of it ASAP, but being realistic and assuming this may take 1-2 years in present market).

We have approx. £100,000 of capital available in savings to put in as equity. Therefore we have a requirement for up to £250,000 mortgage in total - house 2 having an estimated purchase price of £350,000 (this is the maximum that we would want to go to).

I have been trying to work out the best course of action in terms of putting finance in place that we could take up, should we be successful at auction. Obviously there are a number of complicating factors in terms of the price the property will actually go for, what a surveyor would value it at, and the timings involved. Our salaries are currently around £48k and £27k and there were no issues on affordability with Nationwide or First Direct for a total amount of £250k, given the amount of equity we have. We have no loans or credit card debts outstanding.

I have had a trawl through some pages of threads and can't see anything which quite reflects our situation, but I'm sure there probably is somewhere, so please forgive me if this is repeating things you have answered before!

The main things I wanted to get feedback on are:

- Is there any issue with us holding two different mortgages, on two properties, with two different lenders? There seem to be discussion examples of people doing this for BTL purposes but that's not our intention (essentially we are just wanting to bridge the gap until we can flog House 1). Easiest option would be to just re-mortgage with Nationwide as our existing lender, but their current rates for the further £185k advance (on top of the £65k overpayments we could borrow back on the BMR) would not be the most competitive. Also a possible issue on LTV as we would need over 80% if all was borrowed against House 1, hence getting less attractive rates. However the borrowing back of £65k at the 2.5% BMR seems too good to not include, hence our thoughts now of two separate lots of borrowing.

- Is there any view on how possible it is to get mortgage finance in place within 28 days? Clearly once we have paid the 10% down (which we have available now as cash savings) we have got to come up with the remaining funds within 28 days or we're screwed. I spoke to First Direct and even though they said we would qualify for their 2.99 fix, they are talking 10-12 weeks processing time! So unfortunately that deal is out.

- Is there any point in going for repayment rather than interest-only on the new loan if our intention is to pay off the new mortgage in two years once House 1 is sold and the penalty period is over? Normally we would always prefer repayment mortgages and would overpay (as we have previously) but this is a slightly different situation.

Any advice gratefully received!

Typhoon2000

There is no problems holding 2 different mortgages as long as your second lender is willing to give you a new mortage baseded on you income and commitments.
I would only really bid an auction if I already had a mortage offer on the property which means getting the survey done and paper work sorted before the auction. So its best to get a lender (and solicitor) who who can move quickly. A bridinging loan is another option if you already have a large deposite, so you can buy the house before sorting out the mortagage.

theartfullodger

In my experience of auctions (I bought a house at one never having seen inside it - turned out OK oddly enuf..) once the hammer comes down you are committed, come what may, yo pay your 10%-ish deposit there & then and complete full payment & purchase within 28 days...

So, as long as you know you can do that and will not be dependent on e.g. a mortgage company being a little slow getting the paperwork done,, then go ahead.

Just remember: many people think property will keep falling. Only gamble if you can afford to lose !

Cheers!

Lodger

happybroker

you could apply for the mortgage on the auction property before the auction and have the valuation done etc which I presume you would be doing anyway.

if the mortgage isn't quite ready to go at 28 days(and if the bank know it's an auction property they should really get a shuffle on) then you could take a bridging loan until it is though this can work out expensive.

having 2 mortgages and 2 proprties isn't an issue if it fits the lenders criteria on affordability/ multiples.

Something that is potentially this complicated might be better dealt with by a professional which may, unfortunately rule out first direct anyway.

AdviceSeeker_3

happybroker wrote: »

you could apply for the mortgage on the auction property before the auction and have the valuation done etc which I presume you would be doing anyway.

if the mortgage isn't quite ready to go at 28 days(and if the bank know it's an auction property they should really get a shuffle on) then you could take a bridging loan until it is though this can work out expensive.

having 2 mortgages and 2 proprties isn't an issue if it fits the lenders criteria on affordability/ multiples.

Something that is potentially this complicated might be better dealt with by a professional which may, unfortunately rule out first direct anyway.

Thanks for the comments thus far. I'm following up a possible app with another provider but not sure if we'll be able to get valuer out prior to auction itself.

You mentioned a bridging loan - do these still exist and where would one source such a thing?

Rick62

2 mortgages are fine, subject to affordability which is OK for you.

Are you sure you only have 4 weeks to complete? Many auctions now are giving 6 weeks (particularly on residential type properties) and even then there is a stipulated penalty at a reasonable level if it takes longer (e.g. £50/day). Check closely the terms of any auction.

Some lenders are better than others, ultimately it is always a risk, unless you spend the money on a survey etc prior.

Personally I would avoid bridging, I would spend the time finding a good broker and lender and then keeping on top of the process to ensure there are no delays.