1st Time mortgage help

rckdev

Hello,

Sorry for the length of this, it's my first post and not sure what was pertinent and not.

Like most people i'm having a bit of difficulty with the mess that is the financial market right now.

Long story short (would you believe this is the short version), my position is. Mid twenties, father passed away at beginning of recession, he had 2 properties. His main residence sold fairly easily but his investment property which he bought at height of market for £123k, did not, and would not sell. After a year and a half, I decided to use my inheritance to pay off the mortgage and thus have the property transferred into my name. I was not a homeowner prior to this. As family members also had a small interest I offered £110k which was generous in comparison to the £96k valuation survey. I did this thinking that since I was still young, I would be able to hold onto the property for long enough to get my money back and that in the mean time, I could borrow a small amount against the property to release equity if I required.

Six months went by, I had the property rented out and decided to take out some capital by way of remortgage, the idea being that I would take advantage of the low property prices and buy a second property to do up (i'm a carpenter). My own bank RBS flat knocked me down for a remortgage of £40k (less than 40%LTV), I was gutted but decided to try a lender with higher rates. I was strung along for 10 months by a lender who charged me to underwrite the loan, have the property surveyed, they told me the tenant had to leave and I had to use the property as my main residence blah blah blah, oh and they made more than 25 records of mortgage applications on my credit file.

They eventually said that they were rejecting the application because my credit score was too low... which may well have something to do with my score dropping 30-40 points whilst they were mucking about with my file. At this point I should also mention that my credit score is classified as good 922 according to credit expert (in real terms I havn't a clue what that means but since RBS and a higher risk lender both declined me, I presume its bad). I have had a two defaults almost 6 years ago which total about 3K but other than that my file is clean

Not knowing what else to do and being totally upset, I have since put the property on the market and after several months, it is sold stc.

What I would like is guidance and suggestions on is, how long realistically will it take to be 26yrs old, earning approx 25-30k self employed with proofs for 3 years+, not a single penny of debt and £90k+ in the bank before I would be able to buy "my" first house.

Also what kind of mortgage might be best for someone such as myself and who if any are the good lenders out there?

Any suggestions welcome as I'm totally bamboozled by the whole situation and don't want to make any more mistakes.

Thanks

Ross

Wh05apk

I do not see why you would have a major problem, if the £25-30k is your net figure, I would expect a mortgage of £100k would be realistic, with your deposit of say £80k, means you would be about 60%, I do not see that as a problem, Natwest are very awkward with their BTL's tending to look at your earnt income, and it looks like your other app may have been a residential mortgage on a let property?

The defaultes given they are 6 years ago, will be less significant, and given the large deposit most lenders would be happy.

Given your previous issues, I suggest you find a good broker to ensure the process runs as smoothe as possible this time.

rckdev

Thanks for your response,

Well I'm hopeful that when its cash in the bank rather than equity, more lenders will look favourably at me.

What kind of mortgage is easier to get.. Is it higher the interest rate, less harsh the underwriting?

I see advertised rates of 2.89th tracker with low to 0 arrangement fees and I could easily afford the repayments even if the percentage were to sky rocket but is the underwriting of these so tough that few get them?

Its a nightmare... I know there are people far worse off than myself but its only a few years since I could have self certified myself to the hilt,,, now its tricky to even get a proper footing on the ladder with a realistically affordable mortgage... I know things were out of control but its went far too far the other direction!

Thanks in advance.

GMS

Underwriting is probably harsher when you get to the higher interest rate loans with the specialist lenders as they need to be sure any issues were for a good reason. High street lenders tend to rely heavily on credit score.

You have a good size deposit and a decent level of proveable income.

How much are you wanting to borrow?

rckdev

I'm not 100% sure, Ideally I want a medium sized project but I don't want to overstretch myself. I currently live near London and would be lucky to buy a 2 bed terraced, I'm looking further afield and have seen a "character property" that i would love to turn into my home with seperate flat/s to let. It's on at offers in region of £125k and would require substantial work to turn it into whats in my head; I have not done exact figures, my early estimations are that it would require a min of £60k spent on it. i would want to keep some of my money for savings. I don't know how the figures would work but basically if I went for it, I'd need to have access to about £160k combined mortgage and deposit and retain some money for savings.

I realize you may think I'm dreaming but If I pulled it off, my mortgage would be getting paid off by the rental income from the flats I'd built and I'd have a stunning home to live in as well. :-)

GMS

'Character' can often mean 'Listed' which can bring further issues.

Living in a building and renting out other parts can also be an issue.

Don't ju,p in to anything. Run any purchase by a mortgage broker to see if it is possible.

Residential and Buy to Let do not mix well together. If you want somewhere to live then look at it on that basis. If you want an investment property then keep it seperate.

rckdev

Thanks for the advice re building work,

I am aware of the complexities of building regulations as I am an experienced carpenter, I am also aware of the various ways around things when it comes to planning and because of my love for the building, my ideas are very sympathetic and would not be obvious until inside; what I'm not aware of on the other hand is, how much I can borrow, from whom, when and the costs invloved.

I will, once my sale completes and I have my house in order, pardon the pun, be seeking proper formal advice but given my negative experience of the financial sector to date, I'd like to be as clued up about the process as possible, before hand. It seems like it's all about approaching the right broker and therefore the right lender 1st time, otherwise you end up with no-one wanting to touch you as if your the toxic debt that caused the problems they're all having.

GMS

Not all financial advice is poor, in the same way as not all carpenters will rip people off.

Having a residential property attached to a Buy to Let for instance is a big issue. Having 'over exposure' in a building is also an issue so if you converted a house in to 4 flats you would own 100% of the building, likely to cause problems.

I am not trying to preach to you, merely warning that whilst you may well be able to carry out the building work you may not be able to refinance the property. A beautifully converted building does not mean it is mortgageable.

rckdev

Thank you, I hadn't quite cottoned onto the slant that you were putting on it and I now see where you're coming from in a financial sense.

My basic idea is to get planning to convert a large open hall space with out buildings into a home + workshop. My understanding of planning is that councils often look favourabally at sympathetic development of unoccupied buildings into a mix of habitable space if there is a commercial element to it.

I was hoping that a lender of some description would be similarly sympathetic and happy enough to lend me some of the required money if I could prove that the affordability was not dependent on any rental income or return and that once the work to my plans was complete (by comparison to similar local projects and their market value) , the building value would be significantly higher than the total outlay of my money and the mortgage combined and that therefore worst case scenario, their money was secured against a viable asset. But I am a practical thinker and perhaps I'm dreaming to think that It'll happen for me, after all its difficult to find any practical thinking on apart of the banks these days or historically for that matter.

Just annoying because I, like most people who have any skill with property and who could make a fair bit of money are being made to suffer because of other people's mistakes.

Would it be fair to say that in six months time, worst case scenario, I should be able to buy a regurlar property of my choice for say £100k with a £50k deposit at a decent rate?

Thank you for all your help!

GMS

There may well be a lender for any property you convert but it would be restricted. Restricted for you means restricted for future buyers, hence potential problems.

Planning and financing are a world apart. If the councils lent the money then no problem. Unfortunately they dont.

Your skills with property renovation could well make you money, indeed I have clients buying cheaply, renovating and renting out.

As for the question of buying a 'regular' propery in 6 months time. Impossible to answer. Based on what you have said, as of today you should be fine. 6 months howerver is a long time in finances.