Best way to borrow 100k for a maximum of a year

Mrs_Dunbar

Hi, wondering if anyone can help. I have been a long time lurker and have read lots of posts and terms and conditions of many mortgages but don't really seem to find anything that applies.

We own our current house outright(no mortgage).
We have just bought the house next door outright. We want to renovate and extend this house. We need 100K to do it and understandably have no money left to do it. Once we have renovated and extended it we will sell our current house and pay back the 100k. So we need to borrow 100K for a maximum of a year, as think the building work will take about 3 months and then maybe 9months to sell our current house).

All the mortgages seem to have conditions regarding repayments or really high set up fees or can't be obtained as we are not actually buying a property.:)

Anyone have any ideas how we can borrow 100k cheaply for a year, I know we are in a fortunate position but would really appreciate some advice.

Thrugelmir

Try speaking directly to your bank to arrange finance.

Alternatively sell your current home and rent. Whilst undertaking the renovations.

GMS

Look to arrange a remortgage on your residential property assuming valuation allows. Look for a product with no arrangement fees and no Early Repayment Charges. May be that the product is a higher rate than the cheapest available but your main aim is to keep up front and exit costs low rather than lowest monthly payments.

getmore4less

How much was the new place?

Why did you not mortgage when you bought?

IF LTV and income were OK then an offset mortgage when you bought would probably have been the best option.

They work like very cheap overdraft.

FD would have cost < £500 to set up(£99 + legals etc), cost nothing till you started work and nothing after paid off and still leave you the line of credit if you decide to do the same again.

3 months to do the build! have you done this before?

Cheapest option will probably still be an offset on the new place.

Mrs_Dunbar

Many thanks for your replies, i thought i may get some abuse as it sounds like I am moaning. I know we are very fortunate but i'm a little stressed out trying to understand mortgages. We have always paid for things up front and so this is the first type of borrowing we have done so very worrying.

Hi Thruglemir, can't really sell and rent as don't want to cause any disturbance to my twin babies (the whole reason we need a big place). our location is key to where we are. Due to family circumstances we need to be within a few streets of family.

GMS, please forgive my naivity but i didn't think you could get a remortgage deal if you never had a mortgage in the first place. We inherited the money and so bought the house cash. if this is not true then hopefuly we should be ok. Fiding a mortgage with low or no arrangeent fees and no early repayment charges is actually proving rather difficult.

getmore4less, we didn't get a mortgage when we bought the second property as we had the cash and it wasn't earning much interest. We thought it would be better to spend our savings rather than borrow money. We didn't think it would be a problem getting a mortgage for the refurbishment money. Just not sure that we qualify for any type of mortgage as from my reading they either want you to be buying a house or to already have an existing mortgage.

GMS

The term remortgage can be misleading. You do not need to have had a mortgage previously to remortgage. Home loans are either remortgage or purchase. You would fit into the remortgage bracket.

Speak to a broker to see what is available, and if you are comfortable doing it yourself have a look at this option also.

What is your property value?
What is your income?
What are your ages?

ViolaLass

Mrs_Dunbar wrote: »

Just not sure that we qualify for any type of mortgage as from my reading they either want you to be buying a house or to already have an existing mortgage.

Think about it from the banks' point of view, why would they care? Your situation just isn't mentioned much because (I imagine) it's quite unusual to buy outright and then want a mortgage. Subject to your income, LTV etc, you shouldn't have any difficulty. Have you actually approached any lenders?

Thrugelmir

ViolaLass wrote: »

Think about it from the banks' point of view, why would they care? Your situation just isn't mentioned much because (I imagine) it's quite unusual to buy outright and then want a mortgage. Subject to your income, LTV etc, you shouldn't have any difficulty. Have you actually approached any lenders?

A lender will care because the loan is short term and therefore not profitable. Banks make money out of mortgages by lending for the longer term.

Short term finance for the refurbishment will be available but not at mortgage rates.

Personally I would try and sell the house as quickly as possible, rather than in under 9 months. As any downturn in the property market will cost a lot more than a couple of points on the interest rate.

Is 3 months a realistic timescale to get £100k of work done? This isn't the time of year to start major outdoor works!

GMS

Lender would not know a 12 month term. For one it would prove punitive on repayments if a repayment mortgage, and 2 it may be required for more than 12 months.

Go for a mortgage on a longer term with no ERC. That way ou have the cheapest form of borrowing with a way out when sold.

Speak to a broker if you are unsure

Senior_Paper_Monitor

There are some good offset mortages available at the moment with no ERCs (just doing one for a client who is planning a major extension - will remortgage when complete based on new value as very few, if any, stage payments/retention arrangements available for more than 3 month period).

There are some complexities in owning next door properties, combining properties etc in terms of acceptability to lenders - I would recommend using a broker for this, if only to avoid potential pitfalls (also, you admit to not fully understanding the mortgage market).

Trollfever

High street banks do development finance if the figures stack up.