Need a loan of 50K Advice needed please

saverstacey

Hi, I would be very grateful for any help and advice.

My husband and I (plus 3 small children) live in a large 6 bedroom terraced house currently worth £290,000. We have a mortgage of £225,000. We have planning permission to convert the house into 2 self contained three bedroom maisonettes. We intend to continue to live in the bottom maisonette and sell the top maisonette, which would be worth £180,000.

The building and legal costs of the conversion come in at £50,000 which is the money we need to raise on a loan. However, we have a poor credit rating (although we have never been late on mortgage payments) and unsecured debts of around 50K currently managed on a debt management programme.

With the proceeds of the sale, we intend to clear our debts and put the remaining £80,000 towards our existing mortgage, bringing it down to £145,000 which will much more manageable for us, plus we get to stay in our existing home, which we love.

So we have the planning permission, the mortgage lenders permission, but without the finance to do the work our plans are going nowhere. Can anyone advise if we have any hope of raising a loan in these circumstances? Family is not an option, although my dad 'may' be prepared to guarantee a loan for us if that is possible.

Thanks in advance for any help

dudleyboy

Hi,

I know this isn't the advice you were asking for, but...

You have unsecured debts of around 50K (on a debt management programme no less) and want a further loan of 50k for your property development leaving you in £100,000 of debt?? That sounds like complete madness!!!

I appreciate the potential profit from the sale of the top maisonette but isn't that assuming you don't go over budget and you receive the asking price from the sale? Bear in mind that interest rates are also on the increase!

I'm afraid to say it but you can't afford to live in that house, nor can you afford to convert it. With a poor credit history, and £50k of existing debt, you're unlikely to get a loan from a reputable company and would be far better off downsizing to a more affordable property and using any profit on the sale to combat your existing debt.

saverstacey

I appreciate what you are saying, but unforunately in this area it is almost impossible to buy a 3 bedroom property for £150,000 which is what we could afford. I don't see anything wrong with borrowing for a short term in order to release enough equity to pay off our debts and also enable us to have a very comfortable home for our family. We have looked very carefully into costs involved and also consulted estate agents we have dealt with in the past. We see very little risk involved.

We can afford to live in the house at the moment as our debts are being managed we are not behind with our mortgage payments. We are just trying to do the best thing for our finances and our family

yorkshirejen

Have you checked that the terms and conditions of your DMP allow you to take out more credit? Even if you can find a reputable company, with reasonable interest rates to take on the risk, I am not sure if this would jeopardise your existing arrangements with your creditors.

Good Luck

Edit to say - as your mortgage lender agrees to your plan in principle, and you haven't missed mortgage payments, would they be the best company to approach in the first instance.

I imagine you don't have much cash to spare - how will you manage the increased repayments during the conversion and whilst waiting for a sale?