Reposession - mortgage vs bridging loan

humanbean_2

We had an offer accepted on a property which had been reposessed. We went to the bank offering no set up fees so that if we lost the property we would only lose money paid to our solicitor. We explained the state of the house to the bank to make sure there were no problems but the valuation came back that the house is uninhabitable and the mortgage has been refused !!

We have a completion date of 31 August and now need to find £160,000

Can anyone reccommend a lender that will take a 'risk' on an a shell or are we better going for a bridging loan ?

We own a house worth £160,000 with £50,000 equity.

The agreed cost on the new house we are purchasing is £275,000 so we are putting down a substantial deposit.

Thanks all... panicking !!

GMS

Do you have a cash deposit?

If it is uninhabitable then you will not get a standard mortgage. What is the reason for the uninhabitable status?

humanbean_2

Thanks for the reply GMS

Yes we have a cash deposit of £115,000

The previous owners, we believe, removed all fixtures before the house was taken back... there are no light fittings, sockets, internal doors, they've even taken the boiler and radiators, kitchen and bathrooms. We offered £275,000 as we feel it's worth it based on size of accommodation and location... it has previously sold, in good condition, for £600,00 although this was at height of housing boom.

GMS

Bridging may be an option for that kind of borrowing but you need to enter into it carefully.

Would your income support a mortgage of the required size once the property is refurbished? Last thing you need is an expensive bridging loan you can't get out of.

Do you have funds for the renovation work or would you need to raise these?

May be able to raise funds as work progresses.

Have a chat with a broker. Bridging can be a minefield and you need somebody who will act quickly.

humanbean_2

We have a plot of land to sell so have some money coming in off that £90,000) to make changes so the house is habitable, we also have a very kind offer of a loan from my parents if we fall short. We both work full time and have good salaries so can cope with both mortgages but plan to sell our current home once the new one is ready to move into.

The ultimate goal is to get a bigger house with a smaller mortgage, it's proving harder than we expected !

Thanks for the advice, it's not normal circumstances so friends aren't realy able to help, impartial advice is great !!

GMS

Bridging isnt cheap but you will not get a mortgage with the place in the condition it is.

Hopefully the increase in value will mean the costs will be swallowed into it.

Have a chat with a broker. They may well have access to fast funders.

Jimbo1976

Bridging tends to cost about 1.25% per month, with typically an arrangement fee of 1% and an exit fee of 1%. If you can't afford to service the loan you can "roll up the interest" and add it to the balance.

Most mortgage lenders won't allow you to remortgage until you've had the house for about 6 months. So your bridging loan would need to be for that length of time.

As you plan to live in the new property you do will need to have a regulated bridging loan (the majority of lenders do not offer regulated loans). As GMS has suggested the best thing is to speak to a broker. A completion date of 31st August should not be a problem as bridging lenders work quickly.

getmore4less

Will the repo company lend/defer on it, if not they are going to be looking at cash buyers and probaly much less.

This is going to take some time to refurb sell and rent for 6months as close to the place as you can.

You say complete 31st Aug, have you exchanged yet?

humanbean_2

Jimbo1976 wrote: »

Most mortgage lenders won't allow you to remortgage until you've had the house for about 6 months. So your bridging loan would need to be for that length of time.

Really? Oh no... we were hoping to bridge and repay very quickly, say two months...

humanbean_2

No we havent exchanged yet, we can't until we know we have the finances in place otherwise we'll lose a sizeable deposit.

Thanks all... anyone have any thoughts on a build-store style mortgage or would that take far too long?

GMS

Bridging will be the quickest option.