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Buying under market value then re-mortgaging?
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NorthLondonChick
Posts: 61 Forumite
Hi Everyone
Newbie poster on here so pls go easy on me! And its pretty complicated so bear with me!
My partner and I have been renting for the past yr in SE Ldn after selling my small studio flat in Nth Ldn last Feb. I broke completely even in the sale. So we have a 10% deposit to put down somewhere else.
We've been looking at 2 bed places here as we love this area and to cut a long story short we're around £50k-£75k short. (Dont really want a 1 bed as we're hoping for a family soon). But amazingly a property came back on the market on Fri that we'd enquired about in the summer so we went to see it on Sat. It's completely gorgeous but still £25k over budget. As it's a chain free "corporate sale" and the fact they were ready to exchange before the previous buyer pulled out coz it was taking too long, the agent assured us they'll accept the top amount we could afford (£250k). So we put in the offer and got straight on to L&C to get our mortgage AIP asap as they wont take it off the market until they recieve our AIP. Thanks to the flat being a share of freehold with the woman above (its a victorian conversion) the broker couldnt get our AIP that day as he's having to wait til Mon for the underwriters to come in.
Initially we were going to go for a 5 yr fixed at 5.89% which is an eye-watering £500pcm MORE than we're already paying in rent. Do-able but life wont be much fun. And any hope of affording kids goes out the window for now too!
The flat is in pretty good condition but needs a few new floorboards, carpets throughout and the bathroom and shower room knocking into one room (just a plasterboard internal wall). We're planning on doing all that as soon as we move in and hopefully have it completed within a month or so. General valuations for similar flats in the street seems to be around the £300k mark. And as I said earlier, we were already finding it difficult to find any 2 bed flats in our preferred area for under £300k, let alone one with 2 reception rooms, garden and single garage too!
So instead of tying ourselves in for 5 yrs on a fixed rate we're now wondering if we should just get the best deal possible on a mortgage with no early repayment charges and then remortgage as soon as the work has been done to bring the flat up to the standard we need. If we can bring the flat up to £275k (the most recent sale was a 2 bed with just 1 receoption room at £285k) then our LTV ratio would be 85% instead of the 90% and would really help us by bringing down our monthly repayments.
I understand that there is a risk involved as we're relying on the flat being valued at more than it currently is. But I honestly think it would be. There's floorboards missing in the bathroom and all the carpets have been removed. And once the tiny bathroom and shower room have been joined together, I'm sure it'll be worth more than what we paid for it! Plus we're already paying 10% less than the asking price. But obv I'm not an expert, just someone who's been checking property in that area for the past 10 mths.
I guess worse case scenario would be that it'll worth exactly what we paid for it afterwards and we'd just have to fork out another £1000 arrangement fees and switch to the original 5 yr fixed mortgage.
I'm speaking to the broker first thing tomorrow but I was just wondering if anyone had any advice for me before then? I dont want to ask the broker incase there's something glaringly obvious that makes it not feasible and I look like an idiot. But I'll kick myself if we tie ourselves in for 5 yrs then find out the house has gone up in value as soon as we make it liveable again. Tried talking it over with the bf who stared at me blankly before asking what a LTV was so he's no help!
I just dont know who else to turn to - sorry!
Hazel x
Newbie poster on here so pls go easy on me! And its pretty complicated so bear with me!
My partner and I have been renting for the past yr in SE Ldn after selling my small studio flat in Nth Ldn last Feb. I broke completely even in the sale. So we have a 10% deposit to put down somewhere else.
We've been looking at 2 bed places here as we love this area and to cut a long story short we're around £50k-£75k short. (Dont really want a 1 bed as we're hoping for a family soon). But amazingly a property came back on the market on Fri that we'd enquired about in the summer so we went to see it on Sat. It's completely gorgeous but still £25k over budget. As it's a chain free "corporate sale" and the fact they were ready to exchange before the previous buyer pulled out coz it was taking too long, the agent assured us they'll accept the top amount we could afford (£250k). So we put in the offer and got straight on to L&C to get our mortgage AIP asap as they wont take it off the market until they recieve our AIP. Thanks to the flat being a share of freehold with the woman above (its a victorian conversion) the broker couldnt get our AIP that day as he's having to wait til Mon for the underwriters to come in.
Initially we were going to go for a 5 yr fixed at 5.89% which is an eye-watering £500pcm MORE than we're already paying in rent. Do-able but life wont be much fun. And any hope of affording kids goes out the window for now too!
The flat is in pretty good condition but needs a few new floorboards, carpets throughout and the bathroom and shower room knocking into one room (just a plasterboard internal wall). We're planning on doing all that as soon as we move in and hopefully have it completed within a month or so. General valuations for similar flats in the street seems to be around the £300k mark. And as I said earlier, we were already finding it difficult to find any 2 bed flats in our preferred area for under £300k, let alone one with 2 reception rooms, garden and single garage too!
So instead of tying ourselves in for 5 yrs on a fixed rate we're now wondering if we should just get the best deal possible on a mortgage with no early repayment charges and then remortgage as soon as the work has been done to bring the flat up to the standard we need. If we can bring the flat up to £275k (the most recent sale was a 2 bed with just 1 receoption room at £285k) then our LTV ratio would be 85% instead of the 90% and would really help us by bringing down our monthly repayments.
I understand that there is a risk involved as we're relying on the flat being valued at more than it currently is. But I honestly think it would be. There's floorboards missing in the bathroom and all the carpets have been removed. And once the tiny bathroom and shower room have been joined together, I'm sure it'll be worth more than what we paid for it! Plus we're already paying 10% less than the asking price. But obv I'm not an expert, just someone who's been checking property in that area for the past 10 mths.
I guess worse case scenario would be that it'll worth exactly what we paid for it afterwards and we'd just have to fork out another £1000 arrangement fees and switch to the original 5 yr fixed mortgage.
I'm speaking to the broker first thing tomorrow but I was just wondering if anyone had any advice for me before then? I dont want to ask the broker incase there's something glaringly obvious that makes it not feasible and I look like an idiot. But I'll kick myself if we tie ourselves in for 5 yrs then find out the house has gone up in value as soon as we make it liveable again. Tried talking it over with the bf who stared at me blankly before asking what a LTV was so he's no help!
I just dont know who else to turn to - sorry!
Hazel x
She believed she could, so she did.
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Comments
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I can't see a few floorboards and removing a wall increasing the value by £25k to be honest, if it's not comfortable don't do it!0
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I know what you mean! I just think we're getting a bit of a bargain as it is.
But then I guess you could say that if it was really worth the full £275k asking price anyway then they wouldnt be accepting our £250k lol!She believed she could, so she did.0 -
most unlikely
prices are in any event likely to fall rather than rise over the next year or so.0 -
Generally need to have owned the property for at least 6 months before a remortgage.
Some lenders will do sooner but would restrict amount of lenders.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
I told my DD to wait a year ago, she has just had an offer accepted that is 60% of what it was last January, the madness has to stop at some point and in London you are going to see it when the Housing Benefit cap comes in. The landlords charging stupid rents and taking from the public purse won't be able to carry on making a killing and they will have to sell or get real. London is horrendous, my son has just moved there and he is paying a stupid amount of money to rent a room let alone a flat and he has a good salary I feel for people on low wages trying to even rent there.0
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My guess is that the flat will be down valued for mortgage purposes.0
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nearlyrich wrote: »I told my DD to wait a year ago, she has just had an offer accepted that is 60% of what it was last January, the madness has to stop at some point and in London you are going to see it when the Housing Benefit cap comes in. The landlords charging stupid rents and taking from the public purse won't be able to carry on making a killing and they will have to sell or get real. London is horrendous, my son has just moved there and he is paying a stupid amount of money to rent a room let alone a flat and he has a good salary I feel for people on low wages trying to even rent there.
The HB cap for existing claimants has now been put off till Jan 20120 -
The HB cap for existing claimants has now been put off till Jan 2012
Yes but it is April 2011 for new claimants and claimants changing properties. This will have a big effect.
Good news house prices have been falling for months and set to fall all next year if you can afford to wait till then.
Asking prices down 3% today, selling prices way down.
When the spring bounce doesn't appear you will be in a better position to haggle down if you get the finances in order.:exclamatiScams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.
Save our Savers
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The other thing to bear in mind is that if you can't (or will struggle) to afford the flat at what is historically a very reasonable rate of interest, then you really can't afford the flat. Think in 5 years time if interest rates are 10% and your flat still hasn't gone up in value...you're stuck on a high rate with no hope of a re-mortgage.0
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"I guess worse case scenario would be that it'll worth exactly what we paid "
Very dangerous assumption.
Do your research, if you honestly think that the global economy is about to power out of a pothole recession then go ahead.. property will only go up...
On the other hand...0
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