Stupid Q???

MarieAAP

Hi folks

Before I suggest this idea (and possibly raise mum’s hopes), I thought I would run it pass you.

She has a house that is just not selling at the moment, with no mortgage and 100% equity. However she has fallen in love with a house, that will be withdrawn for sale in October. As the couple plan on staying in the house for another academic year and extend it, with the aim of putting it back on the market ready for the next summer holidays. Unfortunately this would then mean the house would be too big, and out of her price range.

Now my Q is this, would the banks consider a mortgage / loan of £130-150k using her existing house as equity e.g. a remortgage as her house is for sale at £235k, and then pay it back once it’s been sold? There will highly likely be ERCs etc. And she is also over 65, receiving her pension and has £40k deposit. If a higher deposit is required, I could provide her with some extra on a short-term loan.

So is this idea, so absolutely stupid? Or something worth investigating?

Thanks
M

Senior_Paper_Monitor

The key question here is does she have income - if so what ?

..... or do you have 'spare income' over current commitments ?

Crinz

What you are talking about is called a Further Advance or Secured Lending. Bascially you can borrow on your current property for whatever reason. A lot of people do this so that they become cash purchasers on a new property.
The key thing would be her income and the fact that she could only have a very short mortgage term. Unless income is very high then she might have an issue borrowing that amount.

She should be able to find a mortgage without ERC's.

She wont know her options until she speaks to a broker. What you are suggesting is possible thgouh and does make sense. Would just depend on a coulpe of factors that we wont be able to answer on these boards.

MarieAAP

Thanks for the responses

Come the 1st week of Sept, she will have also started receiving her Gov'ts pension, so will be under £20k. She has already bought the big spend items thats she wants from her capital sum e.g. a motorhome, so no other committments have been fixed.

Oh the house is for sale at £175, if that helps. They won't go any lower, as they need the amount for their new place, and they have the option of the extending over the winter months.

Does that help further?
M

Senior_Paper_Monitor

Income is going to be a problem for her to simply take a mortage on new property - short term finance could be possible (but more and more of this is now income rather than equity based - something at times, like this, I find unreasonable but that is how it is).

A good experienced broker should be able to find a solution.

luckyfool

She could remortgage it onto a Buy to Let, and let her current property out for 12 months plus (selling it at her leisure in the future). The buy to let should release enough funds to buy the other property for cash.

There would be very very limited numbers of lenders who would consider it due to her age and low income (most buy to let lenders want an earned income of £25k - £30k +), and also the fact that she would be remortgaging her current main residence which some btl lenders do not allow.

But it can definitely be done. It would not be on the absolute cheapest rates, but would certainly be cheaper than bridging finance and would allow her to sell her own property at the right time and without being rushed into it. She would need to plan though for being able to cope with any rental void periods. i.e. It might be sensible to ensure 6 months + btl mortgage payments in savings kept back as a reserve. If she doesn't already have that she could borrow extra on the BTL mortgage to keep that sum back.

A good whole of market broker would be able to assist.

MarieAAP

I would like to say thanks for the advice and tips given, which havebeen passed onto Mum.

It looks like she might be going down a the bridging loan option, but in our research, she has found this website, which I thought might be useful to someone.

http://www.thisismoney.co.uk/bridging-loans

Ta once again
M

luckyfool

Bridging could end up being very expensive, especially if it's open bridging where she has not exchanged contracts with a buyer for her house. The Buy to Let remortgage could well end up being a sensible route assuming her property is readily lettable.

Jackinbox99

From my experience this last few weeks of trying to buy a 2nd home before selling my main home, I think you will find it very hard to get a mortgage. Im in a good position, with a good salary, and even tho both monthly mortgages / bills / council tax would only be 1/4 of my monthly after tax salary, the mortgage companies frowned upon it.

Seems the thing they didnt like was that it wasnt a straight forward sell one house, buy another one. They regard having 2 houses as a risk as you can only have one "main residence", which would leave the other house empty and a risk for squatters.

If I was to rent my main house out, then that would not be a problem at all.

Bridging loans are the alternative, however very expensive. But, may workout the easiest option.