What type of Mortgage

jimbo10

Hi
Iam buying a house in need of modernisation and dont know what type of mortgage to get. I intend to sell it once the work has been completed but was worried it might not sell in which case I could rent it out. If I was to proceed with a repayment mortgage and then had to rent it out would I need to change to a Buy to Let mortgage. Or would I be better off obtaining a Fixed Rate Mortgage. Its a minefield. Any advice would be appreciated.

Conrad

Firstly keep in mind you cannot usualy sell for at least 6 months due to the rules imposed by an incomming lender used by your future buyer.

Second, with any competetive rate deal you will pay a penalty to get out of between 3-5% of the loan amount, usualy in the first 2 years.

Third make sure the buildings insurance reflects the actual occupancy. If you state on a buildings app that you are to reside, and then it burns down and kills a neighbour and the investigator found you were not permanently dweeling there, you could be liable for millions. I mention this as sometimes people renovating a home do not in fact dwell there.

On the other hand if you obtain a residential (lower rates) mortgage, then you HAVE to usualy have residential insurance meaning you must reside there.


As an alternative to all this you could do a buy to let mortgage (minimum 20 / 25% deposit) but fees are usualy high so come out of your selling profit.

As a broker it's this type of case that we call failry complex you take care in how you approach all this.

jimbo10

Thanks for your reply Conrad . Looks like a repayment even with penalty clauses is the way to go.

GMS

Depends on what the figures are. If the Early Repayment Charge was 3% of £100,000 borrowing then you would need to pay £3,000 to leave early when selling. Look for a no ERC product and compare figures. If the ERC is zero and the payments are £150 per month higher for instance, it would save you money if you sold after 6 months.

There are many factors to consider here. Is the property habitable? Is it suitable for letting if thats the idea? How would you fund any works to carry out the modernisation?

If it is not mortgageable then you may need to look at short term finance options.

jimbo10

The property is not habitable at the moment as it has been empty for 3years. Needs quite a bit of work but I have the funds to it. Can you get a 20 year mortgage when you are in your fifties?

GMS

Depends on circumstances, it is possible to get a mortgage to 75, or later with proof of income.

If the property is not habitable it may have a full retention imposed by the lender meaning funds would not be released until works completed.

You may need to look at specialist funding if the property is in a poor state of repair