Remortgage to raise capital for a renovation project

Wood_Elf

We are looking to buy a property for renovation, purchase price £200k. We have done a bit of research and believe that the property is not mortgagable in its own right as it has no bathroom.

We have £80k in savings and we own another property worth c.£180k, which we currently live in. The other property has no mortgage.

We would like to borrow £135k.

My partner earns £25k per annum, plus overtime of around £3k. I am not employed at the moment, however I am applying for part-time jobs, which should bring in an additional £10k per annum.

We have both had mortgages in the past. Good credit history. We have no HP, store cards, loans, etc.

We are considering 2 options at the moment (although open to other ideas)
1. To remain our current property while we renovate the new one and take in 2 lodgers (we have done this successfully in the past and the rent was c.£8.5k per annum) for the 2 rooms.
2. To rent out our current property fully (we should get about £9k per annum) and live at the renovation project whilst we carry out the works (we have a camper van to stay in whilst essential works are done).

Any thoughts on the best way to do this? The vendors won't accept a chain so need to raise finance "as-is".

Apologies for such a lengthy post, any help or thoughts would be much appreciated.

P.S. We have been to C&G and although our credit score was fine, they could only lend us £75k, based on affordability. Seems a bit strange as the mortgage payments were forecast at £425 per month (fixed rate), which is more than adequately covered by the additional rental income. We are savers and only spend about £1k a month between us currently, so could easily manage, worse-case scenario even if our current property was left empty.

Dave_Ham

Its hard to assess given the lengthy post, although I would suspect this is ok.

If you are aged 50+ then affordability may be more of an issue.

You are correct to use savings and existing property will be cheaper, quicker and easier.

I would sit down with a mortgage broker for an hour so they can talk costs more specifically.

Good luck

Wood_Elf

Thank you for your reply Dave.

My partner is 51, so maybe that's why C&G said what they did about the affordability.

We are only looking to borrow for a couple of years, as after we have completed the renovations, we plan to move into the new property and sell the current one, which should clear the mortgage, or almost all of it.

Are there any lenders out there that might be more flexible about our age (I'm in my 30's)?

Dave_Ham

There are always opportunities and other lenders, especially given your low risk situation.

There will be a solution, but likely to require a decent broker..

Simon_gloster

Unless the rental property has been mortgage free for at least 2 years and you have tax proof you have declared that income then the lender you have gone to wont take it into account, hence why you probably got the 75k.

If your not working, then only proable current working income will be taken inro consideration.

You need to pay for a mortgage service and save your phone bills.

Wood_Elf

Thanks again Dave

Any suggestions on how I go about finding a decent local broker? I have read Martin's article on the subject and will be looking for a whole of market broker, but there seem to be 30 or so brokers in my area and I'm not sure how to even begin to narrow it down beyond that.

Dave_Ham

Have a look at their websites, if they feel ok have a chat with a few.

Tell them the highlights of what you are looking to achieve and ask them if they have experience in this area. Then take a view if you like/trust them on first impressions..

This is of course if you cannot get a friend/family recommendation which is always first choice.

Good luck

Wood_Elf

Thanks Dave

A local broker has come up with a couple of lenders who are willing to give us a residential mortgage, if we go down the option 1 route. They are both standard high street lenders so we are pretty happy with that and the rates and fees offered. Also our bank (we have both been with them for years) are happy to assist, so we would suggest to others, if your current account is in good shape then that's also an avenue worth trying.