Second charge / raising capital

Akk223

Hi

I purchased a house 15 months ago on a 2 year fixed term mortgage. Due to my credit history (two unsatisfied defaults from some time ago) at that I used Aldermore Mortgage. Since then, 1 default has disappeared (more than 6 years) and the other has been repaid and will disappear next June which is the same time as my fixed term expires.

One of the key reasons for buying the property was because there was potential to carry out work to improve the value of the property, I bought the property for £212k on a 95% mortgage. I have spent almost £90k doing the house up. This was without a loan. At present the house having been revalued is worth £400k. My current mortgage in comparison to this value is 50%

I have been in discussions with my neighbour about possibly buying her house which is currently let out. This is because (a) she lives abroad and has no intention of returning back to the UK (b) the one downfall of my property is that it has no rear way access (apart from through the house) and buying the neighbouring property I can create a private rear way access.

We are in the process of getting valuations for the property and moving things forward.

As a new landlord on a buy to let deal I can get a 75% mortgage. I was hoping to raise the remaining 25% (50k) by releasing the equity of my current property.

The issue is that if I take the equity out then I will have to enter into a new mortgage. The advantage would be that the interest rate would drop with my current lender but I know that I could get a better interest rate with other lenders after my default has disappeared. The default that is satisfied is for £901.

If I leave my current lender I would have to pay an Early Repayment Charge.

Is there another way that I can release equity from my house to raise the deposit? I was looking at second charges but not so sure about this.

Any help would be much appreciated.

ACG

I think you could remortgage with a high street lender (not all, but some) now up to around 85% (assuming income etc stacks up). However, as you say it will incur ERCs.

There is also the option of a secured loan as your thread suggests and again you could probably go up to 85% without any major problems.

You could do with sitting down and doing the sums/speaking to a broker to get them to do the sums. Its difficult to say which would be the best option as it will come down to the figures inolved.

amnblog

You may struggle to buy the house next door as lenders don't like it.

Make sure that a broker manages this for you.

Akk223

Many thanks.

I was hoping to start speaking to a mortgage broker at the start of the new year.

How early do you think I should apply for a remortgage as my fixed term finishes in June. Do you think a high street lender would agree to a second charge and then become the first charge in June when I remortgage with them?

ACG

Normally around 3 months before your deal finishes.

No. If you apply for a Mortgage it must be a first charge.