hopefully a simple mortgage question

Sparkpea

Hi I've a query about a mortgage and LTV I was wondering if someone could answer for me.

The short story is I'm a first time buyer currently living in housing association house and I am looking to buy. I went and seen a property a few months ago that needed renovated which is something I could do with my trade skills. When viewing the house the agent told me that its a cash only purchase as the previous owner had removed roof joists and the structure needed roof repair to make it safe. Because of this the surveyor couldn't value the house and it is listed at a knock down price.

Now I need a mortgage but my mother is currently looking to invest in property and has cash funds available to buy so we are trying to work out a scenario where she can buy the house and fix the roof then I can buy it off her with a mortgage.

The roof needs steel beams put in which my builder can do no prob at not a huge cost. So for talks sake if my mother bought the house for £40k cash and fixed the roof, then the house could get revalued for hopefully around £65k (going market rate for houses in that area that are in poor cosmetic condition).

If I planned to buy the house off my mother for £45k, would it be possible still for me to get a mortgage for £55k because the house is valued at £65k? I'm wondering can I get extra funds built into my mortgage for the renovation project or what would be the best way for me to go about this?

Any advice and information is appreciated.

kingstreet

She can pay cash to buy the property. She would then have to pay cash to carry out the essential repairs.

After SIX months, you could apply for a mortgage to purchase the property from her at "undervalue" ie if it's worth £65k you can purchase it for £55k and call the £10k difference your deposit. You can't buy it for £45k and borrow £55k.

You can only do this when purchasing from a relative.

Sparkpea

ok so based on value at 65k and mortgage at 45k that would be LTV 69.23% so I wouldn't need a deposit?

Sparkpea

Another scenario has arose that the capital could be loan to me and the house bought as cash in my name. I could then either renovate and sell on the house at a profit and pay back the loan, or I would intend to live in the house therefore what are my options mortgage wise? re-mortgage? whats the pros and cons about this? would I have a problem getting it remortgaged to pay the loan back?

advice?

kingstreet

The loan to value here is the benefit, not the cause. You would be buying a property from a relative at undervalue. Some lenders allow this difference between the value and the agreed purchase price as your deposit.

In the latter scenario, you would be remortgaging an unencumbered property. Some lenders don't like this but there should be enough of a market for you to get a decent deal. I can't see a major difference in you obtaining the same mortgage amount for a purchase, as you might need for a remortgage. The six month rules still applies to the earliest date you could apply.

I don't know any of your individual circumstances. I suggest you find a good whole market or independent broker to look at these options with you in more depth.