Cash poor asset rich - best way to get mortgage

robd103

I'm hoping to get financial advice. In summary we are asset rich but cash poor and need to reorganise our finances so that we can raise some capital to purchase an apartment

Our portfolio
House approx value £240k no mortgage
Rental prop - commercial office value £220k, annual rent 13k
Rental prop 2 - commercial office value c£130k, rent 6k per year

These properties are owned by my father and I. How can we use the equity tied up in these properties to guarantee/fund a new mortgage?

We need to raise some cash to raise a deposit to buy a flat, we are open to selling property 3 any additional advice would be much appreciated.

kingstreet

Remortgaging the house will probably be the quickest/cleanest option, subject to income and credit history, of course.

motch

Are those commercial properties worth those values now in our current climate.

I'd say mortgage on the house probably best option too.

robd103

The first one is, the second commercial property probably has declined to 110k in the current climate.

Only problem in remortgaging is that your effectively borrowing to borrow more? Are there any mortgages which would take into account the value of property which has already been paid off?

Thanks for your help so far

kingstreet

I don't understand the question.

Borrowing to borrow more? Value of the property which has been paid off? It's an unencumbered property, so all the value is available, subject to the lender's maximum loan to value.

Thrugelmir

Is commercial property 1 worth keeping?

Perhaps capital would be better used in new venture.

Thrugelmir

robd103 wrote: »

Only problem in remortgaging is that your effectively borrowing to borrow more?

Realising your assets into cash is the only other alternative.

holly_hobby

I'm confused too ...

You say you need to raise money for the deposit to pch a flat, but Im confuse where the funds are coming from to complete the pch ?

Asking for a capital sum from a lender that requires repayment (with the addition of interest or not) is a loan - so whether secured on an unencumbered property or a currently mged property (via a FA or remortgage) - you're of course still borrowing !

You are saying cash poor - indicating that you don't have sufficient income to service the loan ?

If so, and you are asking if the lender will accept the presence of free equity in the other commerical/semi-comm units, and simply put a charge on them to the value of the advance. With repayment not via regular payments, but on sale of the secured property or other lump sum redemption - then I doubt that will be a possibility for std resi lenders.

Other than a straight commerical arrangement (which would still require regular payments), this would possibly be something an investment bank may consider - Conrad seems to be pretty au fait with IBs, hopefully he'll be along and give his opinion as to whether there's a home for it.

It appears your joint income is rental based and totals 19k pa - is that correct or do you have other sources ? If so are they PAYE or SE income sources?

Assuming that you do have verifiable and supporting income (inc SA302s if SE inc relied upon), it will be easier (certainly uw wise) to secure a residential remortgage on the private residential property - with a lower payrate than will be achieved on any commercial advance.

Of course how much which will be released will be determined by your verifiable income and the lenders max ltv for unencumbered eq release (for prop pch).

A mge broker will source the most suitable lender and arrangement for your needs (nb - as an unencumbered property you will have to absorb the survey/conveyencing fees, as opposed to qualifying for a fee free deal).

Hope this helps

Holly

robd103

Further info - to contextualise my father is 72, I'm 33. I have an income of c£45k per year and have saved 30k for a deposit. I live in london and want to buy a 2 bed flat worth £280k. My mother died and left me half of all the property outlined above. My father wants to help me and is ok selling property 3, which may be a challenge in current market.

Max budget I can raise is 30k + (4*£45k) = 210k - so a shortfall of 70k.

Given the portfolio we own the question is how best to use this to raise the 70k. Appreciate that I can save more, buy a cheaper property, not live in London but any tips outwith of selling property 3 would be appreciated. Thanks for the info so far, a great help. I've never done this before so some of my language is prob not 100% so appreciate the corrections.

holly_hobby

Is the property to be your private residence ? If not, then effecting a IO BTL mortgage means the interest is fully tax deductable - so borrowing is actually a tax advantage ... is that any help ?

If not, and it is a residential pch, if you & Dad are joint owners on the private residence which could be remortgaged , there is an issue with a residential mge and Dad's age - as the max redemption age with the majority of residential lenders is 75yrs (although there is a lender whom doesn't have a static age ceiling - but of course status, affordability and max term will be as per their assessment) - your broker will assist if you want to pursue this, as the lender in question does accept intermediary business.

Other than that, and if sale is not a preferred option, personal loan route ? (secured will give you a longer term and lower repayments than unsecured).

Others will be along with comment ... so pick the bones and see what you like !

Hope this helps

Holly

robd103

the apartment in London would be purchased to be my primary residence. Revenue from the current rental properties goes currently to my father who is retired and has a pension. We have discussed forming a company or an investment trust but havnt got very far down this process due to a useless advisor. I live from my earnings only.