Is a further advance only paid to a solicitor??

Dante384

We have a mortgage from First Direct. I asked for a further advance today, with the intention of purchasing a buy to let property with it as deposit. They said they could do it but they need to have the mortgage offer from the buy to let mortgage company to release the monies to the solicitor on day of completion only. So they won't release any money to my account at all, and only to the solicitor account on day of completion. Is this for real? What's the point of having a further advance if I can't use it for deposit, during exchange of contracts for example, before the day of completion. And why won't they ever release a further advance to my account, but to a solicitor account?

Much appreciated if someone can clarify this for me, I'm so confused, maybe I wasn't asking the correct questions to First Direct.

Thanks

Annisele

I think there might be some confusion between you and whoever you spoke to over the two uses of the term "deposit" - there was another thread about this.

Usually you can't have a further advance unless you tell the lender what you want to use the money for. Sometimes the lender will be happy to lend for (say) home improvements, but not be prepared to lend the same amount for debt consolidation.

If you apply for money for one purpose but intend to use it for another, that's mortgage fraud. (I'm not accusing you of that - I'm just saying that it happens, so sometimes lenders like to be sure people are doing what they said they'd do).

I haven't come across your exact situation before, so I don't know the solution. But I suspect First Direct wants to be sure you only use the money for a BTL, and for no other purpose. If that's the case, an undertaking from your solicitor to either use the funds for your purchase or return them might do the trick. Have a word with your solicitor and see what they can suggest.

Thrugelmir

First Direct appear to want to see the colour of your money. Remortgaging existing property along with a new BTL mortgage suggests 100% borrowed money, i.e. no equity. Which merely increases the risk for both lenders.

Dante384

Thanks very much both. I think I understand what you're saying. When you remortgage to raise money and then get another mortgage that's 100% borrowed money. Is that such a bad thing to do, isn't that how many other people do to get on the property ladder? Or do they remortgage instead of getting additional borrowing?

In my case I have £100,000 outstanding mortgage on a £300,000 property. I thought I could get a further £50,000 advance (it will still be under 65%LTV) and purchase a £200,000 buy to let property with another 75%ltv buy to let mortgage. I needed First Direct to give me at least the £20,000 of the £50,000 right away so I can pay for the "exchange deposit", as in the other post. This is exactly how I told them that I would do. But they said they wouldn't pay me directly but they could pay to the solicitor on completion day only. This leaves me in a difficult position to find £20,000.

Now I think, if I hadn't over paid so much into my mortgage, and kept some it to myself I could have the exchange deposit now. But of course I wouldn't know about this before talking to First Direct, would I? It feels a bit unfair really.

Please let me know if any of this doesn't sound right to you, although I think it may be best if I go and talk to a financial advisor for the best strategy.

Thanks again.

Dave_Ham

None of us on here can deal with First Direct, so we are shooting in the dark a bit.

I would call them up and qualify what one sales person has told you. Often a thread rages on and then it is all down to one person not knowing what they are doing.

I would find it crazy that they would only release on completion day, explain your situation to someone new and without telling them what you have been told; ask again.

Good luck

MacMickster

Thrugelmir wrote: »

First Direct appear to want to see the colour of your money. Remortgaging existing property along with a new BTL mortgage suggests 100% borrowed money, i.e. no equity. Which merely increases the risk for both lenders.

Not really accurate.

Each lender will have a charge on the equity in different properties, so neither is at any significant risk.

I suspect that they merely want to ensure that the funds are used for the purpose stated on the application form rather than, for example, to settle a large tax bill.