Buying with help from parents, then remortgaging

iambigred

Hi,

I'm currently in the process of buying a new build 2 bedroom apartment with the help of my parents, from which I am borrowing the funds from for the initial purchase. This has enabled us to get a great deal on the property, below market value, without requiring a large deposit or mortgage.

The plan is for me to pay my parents interest on the amount borrowed and also repay the debt in order to reduce the LTV to around 70-75% at which point I can arrange a (re)mortgage on property myself.

Asking price, £137k
Purchase price, £125k provided everything is exchanged before end of March
Current savings, £13k all saved in the last 6 months
Amount to borrow: £112k

75% LTV = 102.75k, 70% LTV = 96k

Does anyone have advice on the above? Good idea / bad idea?

Thanks.
Alex

beecher2

75% LTV is £93,750 and 70% LTV is £87,500 - it is calculated on the purchase price, not the asking price. Also be aware that the value might decline further which would mean you'd have to pay back more to get down to those LTVs.

Are you sure about your ability to save when you have to pay all the costs associated with owning a flat?

CLAPTON

why do you say below market value? what do similar flats in your area sell for ?

iambigred

CLAPTON wrote: »

why do you say below market value? what do similar flats in your area sell for ?

There aren't any other properties in the immediate area as this is a brand new development, so it's difficult to compare. Other properties in the development are selling for much nearer to the asking prices (slightly over in one case!). The developers are desperate for immediate cash, so they accepted a lower offer provided we could exchange quickly.

I was under the impression that the value of the property is assessed prior to the remortgaging, therefore the LTV is more favourable to us if we bought it for below the properties true value.

beecher2

iambigred wrote: »

I was under the impression that the value of the property is assessed prior to the remortgaging, therefore the LTV is more favourable to us if we bought it for below the properties true value.

When do you think you'll be remortgaging? The 'true value' of a property is what someone is willing to pay for it and I wouldn't be banking on lenders valuing it at £137k anytime soon. In fact they might value it at less than you're paying - new builds lose value as soon as you move in. Do you have a Plan B for if the flat is valued at say £120k in the future?

iambigred

beecher2 wrote: »

When do you think you'll be remortgaging?...

Within 8-12 months time, however if the property was valued at 120k at that point then this would delay remortgaging by 3 - 4 months if 75% LTV was required.

Dan_1976

Things to look at are:

Borrowing from family can be stressful, but cheaper!

Make sure you have life insurance and discuss what you parents want to do if you cant pay?

Also look at the implications if one or both of your parents passes away. You may need to cover them also.

Will the loan be secured and conveyed correctly by a solicitor? I would guess it may make it easier for remortgaging.

Like buying a brand new car, your flat may drop in price the day you get your keys. Ensure your parents can hang on longer if this is the case.


Good luck you lucky so and so! lol

CLAPTON

iambigred wrote: »

There aren't any other properties in the immediate area as this is a brand new development, so it's difficult to compare. Other properties in the development are selling for much nearer to the asking prices (slightly over in one case!). The developers are desperate for immediate cash, so they accepted a lower offer provided we could exchange quickly.

I was under the impression that the value of the property is assessed prior to the remortgaging, therefore the LTV is more favourable to us if we bought it for below the properties true value.

how do you know that others are selling for more..have you checked with the land registry

also be aware that when you sell, the property won't be 'new' but secondhand which will reduce it's value

iambigred

Dan_1976 wrote: »

Will the loan be secured and conveyed correctly by a solicitor? I would guess it may make it easier for remortgaging.

Thanks for the advice, this is all going via our solicitor and we are going through the options with her early next week.

There is nothing recorded with the land registry yet as far as I am aware, as the apartments in the building have only been released for sale recently and it takes a while for their records to be updated. The information about selling prices was from discussions with the estate/letting agents, so they are to be taken with a pinch of salt, however I do trust them and we pushed hard for the agreed purchase price.

If there is an immediate drop in value, I don't expect it to be too much. The apartment is very well laid out, with 2 large double bedrooms (one en-suite), a massive open plan kitchen/lounge and a large balcony overlooking the river. The building itself is finished to an extremely high standard; the communal areas are exceptional and each apartment is triple glazed with underfloor heating and a ground source heat pump - which should help keep the heating bills down!

Alex

Thrugelmir

iambigred wrote: »

Thanks for the advice, this is all going via our solicitor and we are going through the options with her early next week.

There is nothing recorded with the land registry yet as far as I am aware, as the apartments in the building have only been released for sale recently and it takes a while for their records to be updated. The information about selling prices was from discussions with the estate/letting agents, so they are to be taken with a pinch of salt, however I do trust them and we pushed hard for the agreed purchase price.

If there is an immediate drop in value, I don't expect it to be too much. The apartment is very well laid out, with 2 large double bedrooms (one en-suite), a massive open plan kitchen/lounge and a large balcony overlooking the river. The building itself is finished to an extremely high standard; the communal areas are exceptional and each apartment is triple glazed with underfloor heating and a ground source heat pump - which should help keep the heating bills down!

Alex

Are the apartments fitted out? Kitchens, tiled bathrooms etc......

iambigred

Thrugelmir wrote: »

Are the apartments fitted out? Kitchens, tiled bathrooms etc......

The kitchen is fully fitted out (with integrated appliances), bathroom suites (part tiled), however without any flooring and every wall is currently painted white.