Remortgage problem due to second charge on property.

Joe555

I am currently in the process of remortgaging through a broker. 75% LTV, the mortgage amount is less than 3x my salary, about 2.1x joint, the affordability calculations are fine, and we have no other debt and no adverse credit history. The broker found us loads of deals and an agreement in principle was given.

During the searches the following issue crops up.
Last year we had some remedial work done on the house for which we got a grant from the council. The conditions of the grant were that if we sold the house within 10yrs it was to be repaid. No problem, we're not going anywhere. I was also aware that the council would register a charge against the house in respect of this.

What I didn't forsee is that this would make remortgaging so difficult. The new lender is understandably unwilling to hold the second charge on the house. I understand from the broker that if they held the first this would usually be fine. The issue is that as far as the broker can ascertain, the council, unlike many other organisations, have a blanket policy of refusing to suspend or postpone their charge so that the new lender can have the first charge.

Apart from appealling to the councils better nature, does anyone have any advice? I'm looking at halving my interest rate if I can sort this.

Joe555

Also, the mortgage amount plus the potential liability to the council still comes in at less than 82% of the property value.

Thrugelmir

have you spoken to the Council directly?

Joe555

Not yet, didn't get off the phone to the broker until 5pm, council had all gone home by then!

kingstreet

It's either;-

- get the deed of postponement from the council and proceed

or

- increase the size of the remortgage to repay the council and have only the first charge.

Joe555

I would prefer not to take the second option - the grant is only repayable if we sell within 10 years, which we have no intention of doing. I suppose I'll have to do some sums...

kingstreet

Joe555 wrote: »

the grant is only repayable if we sell within 10 years

... or if you wish to remortgage and the council doesn't feel like granting a deed of postponement.

This will mean no mortgage lender can get the first charge as the council's charge is automatically promoted to a first when the current mortgage is repaid.

Ergo, stalemate. You would have no option but to remain with your existing lender until the expiry of the ten years.

Joe555

Is a Deed of Postponement ever anything other than a goodwill gesture?

ace14

:money::money:I bought a council house outright Right to buy scheme Now I need to raise 30000 . most lenders are unwilling to remortgage because the first charge is for council because of the discount .None of the lenders are willing to lend .How can I go about this...

kingstreet

Ask the council for a deed of postponement, or remortgage for enough to repay the council discount.

There is no other option.

Mokka

ace14 wrote: »

:money::money:I bought a council house outright Right to buy scheme Now I need to raise 30000 . most lenders are unwilling to remortgage because the first charge is for council because of the discount .None of the lenders are willing to lend .How can I go about this...

I encountered the same problem when I asked First Direct for a quote on a RTB mortgage- they refused as they believed that the COuncil would have first charge on the property. They don't. It took me 5 seconds of Googling to discover this:' Reinvigorating Right to Buy and One for One Replacement
Fact Sheet for Lenders' on the Department for Communities and Local Government

website.ttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/5936/2102605.pdf

Just go to another bank. Or use a broker.

Maybe Joe55 should ask DCLG for advice? The government seems to be against Councils making house selling/buying difficult.
There might be some other documents like the one I posted on the subject.