What is best way to borrow?

dawat

My partner has sold her house for £200k and we are buying one together for £350k. My house (no mortgage) needs a lot of work before selling when it will be worth 350+k so we need to raise £150k now. Once my house is renovated and sold (could be a couple of years in todays slow market) we will clear the £150k debt. Am I better getting a mortgage for the 2 years (in which case what type of mortgage is best?) or a bridging loan or any other kind of loan? If a mortgage do I use a broker or approach building society direct?

So many questions and so much ignorance in my case! Advice greatly appreciated. Cheers.

Thrugelmir

Are much are you borrowing to purchase the joint property?

If your mortgage free house is worth £200k now, why does it require a £150k of renovation work, only to be worth about the same value?

kingstreet

Is the property mortgageable?

Condition? Bathroom? Kitchen? Roof? Electrics? Timber? Dampcourse?

Is a surveyor going to walk around and say the property is good security for a £150k mortgage?

Don't expect him to take into account what it might be like in twelve months time, he's only interested in condition and value now.

dawat

Dear Thrugelmir - the 200k we now have in cash from the sale of my partners house. Mine doesn't need 150k spending on it - more like 50k and that will add about 100k to the value making it then worth 350+k.

Dear kingstreet - property we are buying is valued by surveyor at 350k which is price we are paying. As we only need to raise 150k, mortgage would not be a problem but would it be the best option?

kingstreet

Ok. I understand now.

You're going to borrow more than you need to purchase the new house so you can spend £50k on the one that needs renovating?

Fine. Mortgage will be cheapest option. Go for something with no early repayment penalties or penalties which will end at, or before, the point you think you might want to sell your renovation project.

If your circumstances are fairly simple, you could go direct. If it's a bit more complicated, try a whole of market or independent broker.

dawat

Sorry kingstreet. Thanks to my poor explanation I have misled you slightly. I already have the funds separately to fund the renovation of my property so we only need to borrow 150k (plus 10k for stamp duty) to buy the 350k house we have already had surveyed.

I hope that this doesn't alter your previous (appreciated!) advice.

kingstreet

It doesn't. Mortgage with no/short early redemption penalty period is still correct if you want to pay off quickly.

dimbo61

Have a look at offset mortgage so when you sell your property you can then put money in offset account and hence pay no interest on the mortgage!