Remortgage to buy new home???

MarieAAP

Hi folks,

It’s once again my turn to ask for help.

Previously I asked about loans / funds to help mum buy a property before selling hers, and received some fab responses. She has spoken to several IFAs, and the one that attracts her is the following. We would like to know your opinions on it.

Please see this thread for the immediate info.

The update is this: The house is currently for sale at £205k (from 285k) and is under the ‘direct’ attention of a Director’, and is attracting a lot of viewings – phew. This house has no mortgage, and she is over 65 earning a pension (£17k, lucky lady in this climate). The house she loves is £175k.

• The aim would be to get a “Buy to let mortgage” for £120k through “The Mortgage Works” who are linked with Nationwide.
• At a cost of £4,200 arrangement fee + £490 valuation fee and an interest rate of 3.49% tracker to run for 2 years.
• An early redemption fee of £3,600. A total of £8,290 in fees and 6 months interest £2,094.

EDIT: The monthly repayment fee is £369

With this money, it will:

• Act as a deposit for the new house and then a £55k income related mortgage through Leeds Building Society.
• At a cost of £199 arrangement / booking fee and £335 valuation fee and an interest rate of 5.69%.
• And no penalties on early redemption.
• A total of £534 in fees and 6 months interest £1,564.

EDIT: The monthly repayment fee is £150

Now both of these mortgages require written confirmation for monthly repayments, as nothing has been ‘officially’ mentioned or written down. The combined repayments are £520, and between her state and company pensions (guaranteed), this can be paid for and still have enough left for living costs etc.

The IFA’s fee is £99, either way.

So our Qs are this:

• What do you think?
• Has anyone used the Mortgage Works?
• Has anyone used an Income Related Mortgage with Leeds BS?
• Are there any other costs which have not been identified?

We know there is problems if the house doesn’t sell quickly, and if the monthly repayments. Oh the house has previously rented out for £450 / mth, and has been arranged through local estate agents – almost 3 years of accounts available.

Cheers folks
M

GMS

The Mortgage Works are pretty good but their arrangement fees are shocking. Also if the property is for sale there may be an issue with it being remortgaged, especially for a BTL which will require a tenancy agreement. This in itself could cause issues with the sale.

Speak to the broker and see if there is a better BTL product out there. Assuming a 12 month period to sell, the arrangement fee alone would work out at £350 per month. May be an option to see if there is an alternative product with a lower arrangement fee even if it means a higher interest rate. This will of course be dictated by rental calculations.