in a hell of a mess - please help!

chris163

Hi

Right where do i start?

last week i was looking at buy to let options for a studio flat.

Basically the flat is £115,000 - and deposit was £17250 (15%) - rental income of around £500-525 a month

Anyway....I spoke to 3 brokers last week and was offered the following mortgage from one:

C&G 5.5% £799 Setup - 2 year fixed

Great i thought! - put application in and got a decision in principal.

Anyway - put an offer in for the flat - £115,000 instead of £120,000. Offer accepted.

Was chatting to a broker friend of my dad's who said 'i wasnt aware C&G did studio flats?' - i said....strange......so i rang my broker that minute....I made a point of telling the broker it was a studio flat and included it in my online application notes.

She then confirmed after reading 'small print' that they do not cover Studio Flats - having now sent her the pack and £350 valuation fee & put an offer in!

I am 21, a first time buyer and wanted to buy this property with my savings and keep it long term, then in 4-6 months buy my own place with some other cash I have.

I really dunno what to do - she has said the next best thing is 6.2% and setup fee is £2000...and she couldnt tell me what rental i needed to get off the property to make it feasible as it was closing time when i rang.

So in summary....

I have been offered a mortgage which fitted criteria
offered £115k for property and its been accepted
Mortgage now not suitable
No other products available which seem feasible (unless anyone can advise) I dont want to exceed £20k as a deposit

What the hell am i going to do? :mad:

I am very annoyed with the broker but mistakes happen. I really dont want to withdraw as its a great buy.

It has occured to me to go the 'first time buyer' route and not declare im renting it out....but i dont know where I will stand with the new deposit scheme coming out on April 7th and with the mortgage company long term.

ANY ADVICE HUGELY APPRECIATED

Mr_helpful

I know its not wwhat you want to hear but I cant think of anyone likely to do it but also from a BTL point I wouldnt say its a very good deal. The last flat i bought was 119K and rents for 675. You need the yield to cover other expenses. Also studio flats not popular with lenders.

southern_chick

hi i'm sure someone with a lot more experience than me will be along shortly but please don't buy and not tell the mortgage company that you are renting out, i'm sure i'm right in saying that if you do this and the mortgage company find out they can withdraw your mortgage and you could end up loosing any deposit you've put down if they force you to sell quickly (therefore having to take a low offer to sell)
hope that make sense and hope you get it all sorted out

SC xx

chris163

Yea - thanks for your advice.

I am a letting agent and several landlords do it...but I wanted to do everything above board.

My biggest problem is im FED UP of seeing property prices rise. I dont have a foot on the ladder and in all honesty...its just depressing seeing them rise. I have already seen them rise 10-15% in the last year alone...

I have some money which i can access in about 4 months time - but i suspect prices will rise further in this period....making me even more behind...

homer_j_3

Hi

The Abbey will lend upon studio flats but you do need a 25% deposit to do it.

I dont have my sourcing software so don't know who else that would look to lend against studio flat.

What is your current living situation? What implications does it have on you buying to live in for a while and then transfer on to a BTL product when you have accrued enough equity to fund the 25% deposit?

chris163

well i could stick in £24k as my ABSOLUTE LIMIT - and then maybe stick £4k on a credit card to get to £28k....as i said, i could then pay myself back with the money i will have access to in the coming months.

but is it really worth doing?

I thought for £17,250 it would be....but another £11k?

I am living at home and parents are very supportive so they dont charge me rent - they know how hard it is for me to save as property prices are increasing!

MortgageMamma

Ok, I've found 9 lenders who will do this, and some good deals as well

sounds like your broker isnt very experienced.

this isnt a difficult situation whatsoever, plenty will do it. change your broker if I was you.

MM

homer_j_3

I would never suggest that you borrow on a credit card to fund a deposit and if the 25% deposit is putting it beyond your affordability then you have to be realistic.

You have to understand that when buying it does take a few months for it to go through so it may be the case you dont have to put on credit cards, however, I would say do not rush into something now.

I would be looking at what is happening in the housing market and Home Information Packs, potential interest rate increases and also your potential rental yields when rates alter. Work out your figures, get a feel for what the market will do and take your time. The longer you are where you are the more you will save.

chris163

Hi thanks for all the excellent comments!

Mortgagemomma - please PM me and I would very much like to discuss what mortgage options you have found - I would definitely consider using you as my broker if you can come up trumps

With regard to the property....i feel its worth about £125k in our area and needs no work. It currently has a tenant in it and I can Let it incredibly easily due to my job - i have 8 people waiting for a studio flat upto £550 a month.

In terms of the HIPS reports and interest rate hikes....i wanted to cover myself by getting a fixed rate mortgage. My father has had our estate agency business for 20 years and said that when the market crashed, the only steady business seemed to be the 1 beds and studio flats.

Although this doesnt guarantee anything....it does at least mean that I will have minimal loss compared to other property i buy and I can get a tenant in it covering my mortgage payments....ideally I would like to add to the payment each month so this can be paid off swiftly....but one step at a time!

homer_j_3

i think that HIPs will bring a flooding to the market in the next few months and that when there is sso much out there - you are in a buyers market - leave it 12 months when that stock has disappeared and people will be less likely to move "for the fun of it" as some do now then it will recover in the market.

You are right in saying bottom end of market (price wise) will always do well for rent and selling .

You seem to have got some help now and you seem to have understanding of your local market place so you just need to work out whether to take the gamble now or wait..

MortgageMamma

Just a note before I go to bed - if you have 8 people waiting put the price up. a property is worth what people are willing to pay - supply and demand - there is obviously a demand!