Own property, no mortgage, low income - how to fund move?

MildredTalbot

There have been some helpful comments so far - my frustration stems from the fact that now I've done the once desirable thing of owning property outright, with no other debts I can no longer have access to the wonderful world of credit. One institution practically accused me of money laundering when I said I wanted a loan against the value of the house in order to buy another.

And yet it seems so simple - If I renege on the loan the institution would just take what they're owed (and no doubt all their charges!) from the enforced sale of the property whose deeds they would have been holding.

But if the property still had a mortgage on it which was being paid off - then no problems in moving to another house - millions of people do it.

Say I can demonstrate the ability to pay a years interest on a new mortgage from capital. Not what we're usually advised to do - but I could. The bank gets its money, the house should have sold in that time and I can pay off the new mortgage in full - no doubt with the fees associated with such early completion.

Surely the bank would be laughing all the way to the bank?

I'm obviously missing something fundamental in the way Banks/Building Societies work. I've spoken to several managers in the last few months - they all accept the truth of what I say - but then say "That's not the way we work", but then can't/wont explain what that way is - just that it's the rules.

Chinkle

The problem is you CAN'T demonstrate that you can pay the interest on a mortgage.

MildredTalbot

Chinkle wrote: »

The problem is you CAN'T demonstrate that you can pay the interest on a mortgage.

I can demonstrate that I have the capital to fund more than a years interest payment on a 95% 160K mortgage. (Though that would run capital down to zero and if rates go up then obviously less than a year)

I can demonstrate that I have absolute title to a property that has been recently valued (twice) at well over 300K (providing it's cleared and the developers know they can move in at their convenience).

Rockporkchop

I don't understand why you won't just sell the property as it is? Even if you could get your hands on the money, why waste a year of your life and a huge amount of money and effort doing up a house you aren't going to live in? In this market you probably won't get a return on the money you spend on renovations and chances are, any buyer will want to change everything as soon as they move in.

Put it on the market as "complete refurbishment required" or "ideal renovation project", offers over £299k and people will go absolutely mad for it and probably pay stupid amounts.

Then take the cash and move on to your lovely new home.

MildredTalbot

Some good Qs here - I'll try and answer

Rockporkchop wrote: »

I don't understand why you won't just sell the property as it is?

Advice from two agents are that it needs to be cleared so that people view it as a refurb project and not as an existing home. Example - a large dining room that has a lot of large antique dressers around the walls - this effectively drops the apparent size of the room by about 6 feet in each dimension. Another: A large bedroom that with existing furnishing one can't see the obvious potential for splitting into two that is apparent from a architects drawing. And so on... There is a vast amount of stuff - some of which may return to fashion sometime in the next ten years - I've missed at least one cycle in the ebb and flow of auction house fashions since I got a lot of it. I'm prepared to risk some money by putting it into storage against that return - up until now I suppose I've been using the house as a storage facility and a home as a subsidiary.

Rockporkchop wrote: »

why waste a year of your life and a huge amount of money and effort doing up a house you aren't going to live in?

Crucial point I think - and one that I hadn't taken on board in previous years when this funding problem wouldn't have been an issue. As one gets older the remaining years are more valuable. They ought to teach that at school ...

Rockporkchop wrote: »

In this market you probably won't get a return on the money you spend on renovations and chances are, any buyer will want to change everything as soon as they move in.

Exactly the point made by the valuers - not even to put in a basic modern kitchen - the existing original, functional but tatty, 50s fitted cabinets and equipment might even be a selling point as with the pull-chain loos!

Rockporkchop wrote: »

Put it on the market as "complete refurbishment required" or "ideal renovation project", offers over £299k and people will go absolutely mad for it and probably pay stupid amounts.

Which is why I don't understand the banking institutions' refusal to advance 50% of its value, when even 25% couple with skill, time and effort would turn it into a very desirable property indeed., probably pushing it into the half mill mark which is what neighboring properties go for.

YES, I should have done this myself ten years ago,

Looks like the general consensus here from those that have understood the situation is:

1. Clear
2. Rent and Store
3. Auction/dispose of "stuff"
4. Sell property:D

BUT, I'd still like to know why the banks regard my proposal to take a mortgage out to buy another property (secured on the existing one) is seen as near criminal rather than just an extension of the usual way people buy and sell houses. It seems to penalise one for paying debts off! Perhaps that is the message - keep working, keep paying!

EdInvestor

MildredTalbot wrote: »

The banks and building societies won't touch me because I don't earn enough.

That's the reason you can't get a mortgage, nothing more complex than that.You could look into either a Buy to let mortgage (based on rental income not householder income) but that might defeat the purpose as you would need to get a tenant.

An equity release mortgage might also generate the amount required but you would pay very high redemption fees and charges, plus high interest.

Neither of these options is anything like as sensible as simply clearing the house out and then putting it on the market.

mlz1413

[QUOTE=MildredTalbot;24081089
YES, I should have done this myself ten years ago,




Looks like the general consensus here from those that have understood the situation is:

1. Clear
2. Rent and Store
3. Auction/dispose of "stuff"
4. Sell property:D

BUT, I'd still like to know why the banks regard my proposal to take a mortgage out to buy another property (secured on the existing one) is seen as near criminal rather than just an extension of the usual way people buy and sell houses. It seems to penalise one for paying debts off! Perhaps that is the message - keep working, keep paying![/QUOTE]

Say the banks lend you £200,000 with a promise that in 1 year you will pay back £220,000 from the sale of your house.
During the next year you sort out your new home, take a holiday and visit some friends.
The bank rings you in 10 months time to see what agent the house is one the market with and you say oh none I haven't cleared anything out of the house yet.
Do the bank wait another 6 - 12 months until you get round to clearing stuff? Do they start repossesion? Do they personally sue you?

Also from the banks point of view what if your £330k becomes £250k, what if the house burns down or you die during the waiting period - too many risks, too many factors from them to worry about.

AND none for you to worry about if they lend you money with no interim repayments.

I think you need to stop worrying about what everything is worth, put the stuff you really LIKE into storage and then either put it up for sale as it is or invite an auction house round to clear the lot and then put it up for sale. Move to a smaller house when you have sold and then enjoy yourself.

MildredTalbot

EdInvestor wrote: »

You could look into either a Buy to let mortgage (based on rental income not householder income) but that might defeat the purpose as you would need to get a tenant.

This was one of my earlier attempts - to get the buy to let on the smaller property - with of course 100% guaranteed letting - because I would be living in it! They didn't go for that one at all! And this was while you could still get Buy to Lets ,,,

MildredTalbot

mlz1413 wrote: »

I think you need to stop worrying about what everything is worth, put the stuff you really LIKE into storage

Sage advice - and it's what I have been slowly edging towards in the last few weeks - really looking at stuff; Do I need it, would I buy it now, Am I keeping it out of some sense of duty to the past, do I realistically think that it might have appreciated in value in a few years time more than the cost of storage ...

.. To take advantage of good deals and opoortunities one certainly has to be able to move fast and unencumbered by clutter.

As said aready by one respondent - Keep it simple!

LE3

You say that you have "a few thousand" in savings - would this fund the rent on a small property for say 6 months whilst you clear the property & get it ready for sale? Yes, you may miss out on your "dream property" but there will be another coming up soon - you may even be able to negotiate to rent your "dream property" for 6 months before purchase if the vendor is open to renting instead of selling ...