Mortgage headache

Rhuk82

Hi, I have an increasingly large headache over a loan/mortgage and I hope somebody might have some suggestions to help though really not sure what. Apologies for rambling on, the harder figures are at the end!!

I moved into my partners property two years ago which is in their sole name at present. My partner has been running a village cafe and bed and breakfast from the same property for 4 years which hasn't turned a profit.

In July/August last year we needed to have some roof repairs on the property. My partner took out a loan from a friend to cover this and pay off some other debt and to pay for some improvements. That loan is in their name and not in the business name. The loan repayments were agreed at £1k per month. Once half the roof had been taken off, the roofers told us that we needed to replace the roof and so the cost escalated from £3k to £29k and thats where the problems really started to kick in.

We approached our business bank straight away who got us to complete a personal secured loan application form secured against the property (!!) and seemed positive about it. Within a week that now understandably was declined as the property is home to a business that wasn't making a profit (to receive commercial loan). They were unable to consider my own full time employment income as they separate the business and personal monies (admittedly smarter than we do). We then used credit cards to cover the difference between the loan we had and the roof costs.

We then approached a financial adviser my partner knew through family who approached another couple of banks for loans who declined for the same reasons. At this stage we then seriously considered closing the cafe to lose the majority of overheads and then just maintain the b&b alongside my own full time employment income.

The financial adviser did however know a friend with an existing private equity business who was looking to start up a loan business. On 7th December last year we had an agreement from this lender via our adviser for the monies we were looking for. Relief!! We were told that their solicitors needed to draw up some paperwork and that we shouldn't expect the money before mid January. This was then extended by a couple of weeks and then a month and a further couple of weeks to mid-March. At that point we were told we could expect to have money within a fortnight on a Monday. On the Friday before this when the paperwork was supposedly finalised, we were told that the lenders now needed to apply for a license to lend monies to us (which is correct where we are located). We contacted the adviser to express our frustration, reminding him that we were pulling our hair out as far back as October when we first approached him. We said that again we were thinking of closing the cafe but he said that we shouldn't say that as the lenders may get the jitters and that we should "hold on in there as your loan has been agreed". We were told that they needed to get more paperwork drawn up and to give them 3 to 5 weeks which we had confirmation was a worst-case scenario. After 5 weeks (two weeks ago) we chased the adviser who then said that the lenders were now looking to lend larger amounts than we were looking for due to the costs that were involved. He said that he didn't know whether they would go ahead or not now but that he hoped to let us know within a month. This was two weeks ago and I insisted that we ask him to look into something else.

The adviser approached a bank for a personal mortgage with the property assigned jointly into my name with no business on site. He confirmed in a very relaxed e-mail today (a call would have been nice) that they are unwilling to lend due to affordability concerns and that we should try and show an excess of £600per month for three months in my bank account and they will then reconsiderWe're preferably looking for £65k to be mortgaged against the property over 15 years which is worth a little over £300k. The property will not be home to the current business (ideally we'd like to continue a b&b but gather lenders would want that to be a corporate loan which we won't get). I earn c.£27k a year. At the moment we assume my partner earns nothing as business will finally be stopped. My partner is willing to assign property into my joint name. My partners credit rating is 964. My credit rating was 963 as recent as January but since trying to take on much of the debt from the business and loan repayments (and I do realise how unsecured that all is!!) plus one late credit card payment has reduced down to 799.

Currently I'm paying £450 loan repayments on my partners private loan which have another 18+ months to go (and need to be increased back to £1000 as the friend/lender has very kindly agreed to temporarily lower to £450 due to our situation). I am also paying about £550 per month in our credit card payments which is a little above the minimums. The company has £10k in debt which i will pay off with £13k of maturing share options next month (originally intended to use to pay off an old student loan).

Summary of all above is that we got ourselves into a big pickle through our own silly decisions last year. We do also feel greatly let down by a financial adviser who regrettably encouraged us not to do the sensible thing in closing the business 6 months ago and again 3 months ago. He's required lots of chasing and hasn't managed expectations at all well. We assume that the loan that was supposedly agreed back on December 7th will probably never materialise.

I find the banks affordability concerns slightly frustrating - i take home £1675 per month. Generally the loan repayments etc currently total £1,500 but for the past two months have been £1,000. We did ask the Financial Adviser to stress that these were exceptional circumstances for us. The bills that the bank would have been looking at on my statements would have included electricity/gas at business levels rather than residential. All of the loans etc will be reduced down to just a c.£500 per month amount - to me, thats more than afforable!! We can comfortably live off the remaining amount plus what ever my partner earns as there are no dependents.

We have considered selling the building, however that will likely take many, many months.

Do we risk approaching more banks and potentially getting searches on our credit reports and will they feel the same about affordability? Any suggestions for a different approach would be greatly appreciated.

Apologies for such a long drawn-out explanation!!

Thanks
RH

Dave_Ham

Hi RH,

I thought I had a stressful last year - you top mine off my miles..

Ok, you have given loads of information but obviously there is a lot more.

Can you please give more details on the property at the moment ie cafe on front and 3 rooms of which how many are rented on a b&b basis and assuming you live in at least 1? Additionally the other place you mention with a value of £300k ish?

Sorry, I am a tad confused. If you can separate out the varying property details and then your proposal of shutting cafe and what that will look like, we will be able to offer some more specific and likely more informative positions on the lenders attitude to this..

Finally, hope you did not pay your FA anything for nothing?

CLAPTON

start by listing your loans and debts is a simple way
amount, apr, monthly payment, term

and 29k for a roof seems somewhat expensive

Rhuk82

Thanks for replies. £29k is expensive though we did have 3 quotes prior to originally agreeing to the initial quick fix which were all for around that and upwards. Its partly due to location nationally and also location in terms of a conservation area whereby we had to use specific slate tiles.

There is just the one property. At the moment the downstairs of the building consists of a kitchen, two toilets, and two rooms where customers would sit in. The smaller of the two would be our sitting room as it was when the building was originally bought and the larger room will become a dining room but with plenty of wasted space (when the property was bought this was an unused room and not at all homely). The two toilets were the dining room when the property was bought. The larger room does currently still have the drinks and cakes fridges which we will need to sell. The kitchen is also fitted out for commercial use and again we will need to sell and replace some of that with new white goods.

I wonder whether a surveyor (if we were able to get that far) would be able to see that its a slightly last minute rush job due to finally giving up on our advisers promise of an agreed commercial loan, or whether they would look down on the commercial equipment being present??

Upstairs there are four bedroom areas - a large one with ensuite shower room (the larger b&b room), a slightly smaller one again with an ensuite shower room (our current bedroom) two smaller rooms - one is a small double (second b&b room) and the other a single/small double which we have used as sitting room. Between the latter rooms there is a decent size bathroom.

Up top is a reasonably large attic room though due to ceiling height and lack of compliant staircase, this could only really be used for storage.

The building is too large for just two of us and a dog (at least two idle bedrooms), but houses are taking a very long time to sell here at the moment and preferably we wouldn't want to sell ourselves too short. There is a side lane from the kitchen/back door and a small sitting area along the front of the building but no gardens as such.

Happy to confirm that the FA has received no monies from us - he would have taken a commission on anything that he would have arranged

Thanks in advance

holly_hobby

What a pickle ... I hope I have read correctly, and will just note my initial obsevations.

The property was recently semi-commercial prem's, in that it was a B&B & street level Cafe and also your own prviate primary residence to the rear.

The property is no longer commercial i.e no business is currently conducted or ran there.

You want a residential re-mortgage on the property.

Ok ....

To obtain a residential mge, you will need to apply for a change of use with the local authority (from commercial to exclusive residential dwelling), if this was previously a residential property that was converted to the shop front cafe, its likely to be granted. If its always been semi-commercial they may refuse.

If the change of use is agreed, for residential mge purposes, you wil need to convert the property to obvious residential use (ie remove the commercial kitchen, etc), which will be verified by the surveyor when they attend. Whom are assessing the suitability of this on behalf of the lender for resi finance, so will be looking for a fairly traditional and obvious residential dwelling.

If its situated close to/within a row of properties etc, that are commercial units - the type of business conducted and hrs of trading, will also have an impact on a residential survey (thinking specifically of take aways, bar's, restaurants, taxi offices etc - with late night clientel/cooking smells etc).

If the conversion changes to the property have not all been completed by the time of survey, or the surveyor requires more adjustments made (to ensure the property is unlikely to be used for further commerical use post completion), they will put a full retention on unitl the works have been completed, and re-inspection has taken place.

This is assuming your status checks will be ok - I know you have probably had your fill of advisors - but a good one is worth his or her weight in gold, and I feel to expidite this as quickly as possible you need to sit down with one.

They will need to make a few calls to their BDMs and sound out

A - what amendments would be reqd to the property for a resi mge to be possible

B - a quick AIP on you, to find out the max borrowings that will be considered on submission of full app.

Its going to be a little messy I feel - but hope this have given some pointers and helped a little

Holly x

gingeralan

Rhuk82 wrote: »

I wonder whether a surveyor (if we were able to get that far) would be able to see that its a slightly last minute rush job due to finally giving up on our advisers promise of an agreed commercial loan, or whether they would look down on the commercial equipment being present??

Surveyors will miss that, I 100% guarantee it. I do not know what he point of these leaches are. They took £400, advised me woodwork fine, no problems, After moving in we found a large hole in the floor, and 7 out of 9 internal doors have warped to the point they are merely flaps!! I have grown tired of banging my head against a brick wall with them as there were many other things missed also.

Apparently they merely do a 'visual inspection' so if you are worried they might notice the commercial equipment, seriously, just put a blanket over everything, they will not lift it.

I feel totally ripped off by them as a profession, so take every opportunity to bash them. I know it's sad, but it makes me feel better.

holly_hobby

gingeralan wrote: »

Surveyors will miss that, I 100% guarantee it. I do not know what he point of these leaches are. They took £400, advised me woodwork fine, no problems, After moving in we found a large hole in the floor, and 7 out of 9 internal doors have warped to the point they are merely flaps!! I have grown tired of banging my head against a brick wall with them as there were many other things missed also.

Apparently they merely do a 'visual inspection' so if you are worried they might notice the commercial equipment, seriously, just put a blanket over everything, they will not lift it.

I feel totally ripped off by them as a profession, so take every opportunity to bash them. I know it's sad, but it makes me feel better.

It sounds that you had a basic survey, which if for a mge was for the lenders benefit only - so you have no comeback.

If this wasn't a basic survey, but a homebuyers, you need to take the matter up directly with the surveyor and RICS, and please start your OWN thread if advice is reqd.

As your post is not helping the OP or adding value to this thread.

H

gingeralan

holly_hobby wrote: »

It sounds that you had a basic survey, which if for a mge was for the lenders benefit only - so you have no comeback.

If this wasn't a basic survey, but a homebuyers, you need to take the matter up directly with the surveyor and RICS, and please start your OWN thread if advice is reqd.

As your post is not helping the OP or adding value to this thread.

H

Done, no advice required, just kinda went into a bit of a rant. Homebuyers incidentally. FYI I am not hijacking this thread, just started a chain of thought in my mind.