Help! Just about to loose 26k on deposit on new flat - advise please

simyboye

Hi there,
I'm up a big creek without a paddle! And I'm about to sink.

I've worked very hard to raise 26K for a deposit on a brand new flat in Edgware london. The original purchase price was 260k but due to negotiation, managed to get 20k off so I need a mortgage for 212k.

The new purchase price is 238k.
Its just been valued at 280k by an independent valuer.

However, I can't raise a mortgage so I stand to loose my 26k deposit. The developers wont hand back the deposit. Obviously.

As you can imagine, I'm having some sleepless nights.

Can anyone please help me?

It would be a residential mortgage. I have been told I need to raise a further 12k and have someone else go in with me. If I rent it out, my rental income wont cover the mortgage. So no go there...

Or,

Raise 21k and have for example my mother as a guarantor. Then the mortgage repayment is £720pcm with a rental income being £11-1200pcm. At which point I can then sell ASAP to get my deposit and equity out.

Neither of these are do-able, I just dont have that sort of cash.

So, can anyone help/ advise me. I need a 85-90% mortgage. If there's any IFA's that can help, please contact me. I appreciate the current climate and LTV's at the mo.

And I need to sort this for the start of next month.

Or if anyone wants to come in with me, let me know. PM me.

Many thanks.

James

260k purchase price
26k deposit
238k Revised price
212k To mortgage
280k Current value

Hippychick

No advice really but would head other members NOT to enter into this sort of deal with random strangers off the internet.

If this is a genuine post go see a whole of market broker. You have not advised any details eg. salary etc so without that info I doubt you will receive much help.

GMS

You will not get an 85-90% mortgage on a new build flat. None out there at that level. As for renting it out, how could you if you had a residential mortgage?

Lending will be based against the LOWER of the purchase price or valuation so if 212k needed against 238k you are at 90%. Even at 80% on a new build flat you would struggle, and for a Buy to Let you would have almost no chance.

Does the development still have flats available? If not you could try to sell on your reservation at a reduced rate. Still a loss on your deposit but hopefully a much smaller one.

simyboye

Hi there.
I would prefer to do this on my own. This is my families future here and the recession has hit everyone.
My salary is 31k
And what is a market broker? IFA you mean?
Many thanks

GMS

With a salary of 31k you are looking to borrow 7 times income. Not a chance of raising this kind of money.

How exactly were you planning on raising this kind of money in the first place?

simyboye

I think I have been given real bad advice here. Even before the recession. Who would have lent me the money at 7 times my salary... let alone now. I just dont see what I can do?

GMS

Had you looked at mortgages before parting with 26k of your hard earned cash?

You say you have been given bad advice. By whom?

Without a Decision in Priciple as a minimum from a mortgage lender you are seriously crazy to put an offer in, let alone part with a deposit.

haras_nosirrah

Has your income or circumstances dropped since you first exchanged on the property? Did you seek advice on mortgages at the time as even before the recession I think 5x salary was the maximum. When did you exchange on the property and did you ever have a mortgage offer then?

With guarantor it would be based on 100% of parents earning i.e. she would have to be able to support 100% of the payments and therefore have a salary of around £53,000 herself. Time would also be an issue as it would need to finish subject to her retirement age i.e. 65-75 years at age of closing mortgage approx. You would need to go interest only to make it affordable and most lenders are very very difficult with that at the moment as well.

For btl you need a min 20-25% deposit and rental income would need to cover interest only mortgage by up to 125% (dependent on lender)

I think your only options are going to be to go on the mortgage with someone else if anyone will, increase of deposit as most lenders need 20% on new build, talk to developer to see if there is anything else that you can do there i.e. sell to someone else especially if it is worth more than you are paying they may get more that way and not keep deposit (long shot though)

You are not going to get this mortgage on your own.

Be aware that the developer will keep your deposit and would also be able to sue you for the difference between what you exchanged for and what they eventually sell for. If the price is what you say this won't be an issue for you.

I wish you the best of luck.

simyboye

I exchanged 18mths ago. And no I didnt get a mortgage offer as I wouldnt have flipped/ sold it before I had to raise a mortgage on it. I was told this by the property investors.
I feel like a very small fish in a very big tank at the moment. I think I was going interest only on this if I did have to get a mortgage. Then sell up ASAP.
I have a possible friend that will come in with me, however the deposit is still a big issue...

GMS

Sorry to be harsh but you have taken a massive gamble and lost. Greed is a terrible thing. You assumed you could make a fortune on this flat. Did it not occur to you that if it was so easy to 'flip' the flat the developer would have done it themselves?

New build flats are a big no no with lenders at present due to the massive losses they have taken on them in recent years.

Income wise you are a million miles away, and as a Buy to Let you have little to no chance due to it being a new build flat.

Sorry to be harsh but unfortunately that is the truth. Hopefully your friend can resolve it with you.

Please remember, your borrowing will be against the purchase price, not the valuation. The fact that you have negotiated a discount with the developer is irrelevant to the lender.

Probably looking at needing a 25% deposit as a minimum. Income will also need to be increased substantially by your friend being added on. If they have a mortgage at present you may also encounter big issues.

You really need to speak to a 'Whole of Market' broker asap

haras_nosirrah

Did your solicitor warn you of the dangers of exchanging without a mortgage offer in place. I know it wouldn't have been valid at the time anyway but most people in this predicament is because their mortgage offers are no longer valid and the values on the properties have dived. Yours seems to be that you could never have got a mortgage in the first place.