House-buying idea - maybe new, maybe not...

rubsley

So I'm one of I guess many thousands of people who can quite easily afford a decent chunk of rent but probably wouldn't get a mortgage or be able to raise the deposit to buy a place somewhat cheaper than the one I'm currently renting. Obviously with a bit of time and effort I could rectify that situation but...

Well, I had this idea, and I wanted to float it out there and have people tell me everything that was wrong with it - because in my simplistic head it somehow seems to work.

1. You find a property (they're still going for about 60k where I am)
2. You hit up all your friends and relatives and borrow a grand or two (or more) from each person
3. You buy the place for cash
4. You remortgage it
5. You pay everyone back
6. Et voila! You've got a mortgage

Also:

7. You lend your friends and relatives who are in the same position your savings, and on and on, and soon enough everyone has reached stage 6.

So...what do y'all think?

19lottie82

wow, i want friends like yours if you have 30 that will lend u 2k each!

MoneyJuggler

As much as I think the idea of friends all lending money is a great one, if you remortgaged, wouldn't you have to leave some collateral (the equivalent of a deposit?) in the house, how would you pay that bit back?

I guess you could over time do that, just not straight away from a remortgage?

Could be wrong though, just thinking as I type

RabbitMad

You forgot setp 0.

0 - Bank won't lend you money for a mortgage as you haven't the income / deposit required.
...
4 - The bank now lend you the money even though you haven't the income / deposit required?

Doesn't seem to work to me (unless ofcourse there is some major HPI in the area or you buy a delapidated place and add REAL value making it habitable, and I'm not just suggesting putting in a new ikea kitchen, painting the walls and calling yourslef a property developer)

MissMotivation

You won't be able to remortgage 100% of the property SO who isn't going to get paid back?

Plus a million other reasons this wouldn't work.....

yanda

I'm pretty sure 100% remortgages are a thing of the past, but you may be able to get 90% etc ones - i'm guessing they're at the same eyewatering rates/restrictions as a 90% FTB mortgage tho, so may not be worth it.

DannyboyMidlands

OK, so say you have 6 people who all stump up £10k:

You buy the place for £58k and pay £2k in fees.

You remortgage to 90% if you're lucky. So now have £52k in the pot.

So number 2 in line buys a place for £50k and pays £2k in fees.

They remortgage to 90% if they're lucky. There is now £45k in the pot. Etc. Etc.

This whole process would take years and what does the last monkey in line get? A rabbit hutch?

What if prices continue to fall?

kingstreet

If you can't get a mortgage to buy the place, what's going to change to get you a mortgage afterwards?

In addition, until you've owned a property for six months you'd find it very difficult to get a mortgage if you were 100% squeaky clean.

twirlypinky

I'm going to humour your crazy idea.

It wouldn't work because a bank won't lend you money for a mortgage without a deposit.

Buy the house with the money you've borrowed from your very generous friends and family (you owe 100% of house)

Get a loan from a bank for "home improvements", they'll lend to you because you've got no debts (you owe 110% of house)

Use the cash from the loan as a deposit so you can get a mortgage on the balance and pay everyone back. You'll end up with a loan and a mortgage and be very stupid.

puddy

so you're saying that if someone owns a house outright for 60k, and wanted to change that to a mortgaged home, for 54k, the bank wouldnt lend?

why not?

Tixy

puddy wrote: »

so you're saying that if someone owns a house outright for 60k, and wanted to change that to a mortgaged home, for 54k, the bank wouldnt lend?

why not?

A bank would lend, if the borrower had a good credit record, sufficient earnings etc to obtain a 90% mortgage taking into account their other debts and financial commitments etc and the banks valuation of the property.
But the same bank would have done the exact same assessment if the person wanted a mortgage to purchase the house, so if you can't get a mortgage before you buy, you'd be unlikely to get one just after given the same circumstances.