Extra lending question

thecakelady

My husband has recently inherited a house from his Uncle. He has decided to rent it out but before he can do that the house needs some work doing to it (new kitchen, new carpets, redecoration). We do not have the money to do the work so decided we'd look into borrowing extra on our current mortgage to do some work on our own house and the work needed on the inherited house.

However, our current mortgage company (Nationwide BS) refused to lend us any more. My husband's salary is average and I'm self-employed with a relatively low wage and we have credit card debt and Nationwide will not take into account that we have a mortgage free property worth approx £200K (the inherited house) and will only look at our current income.

My husband has someone wanting to rent the property as soon as possible but we cannot do the work unless we can borrow money to do it.

We only owe £7K on our own mortgage and want to borrow between £5K and £10K.

I put a complaint in to Nationwide but they stuck to their initial decision not to lend us any further money. I have contacted the Financial Ombudsman but I'm not holding out much hope of a change in decision.

What would be our best option to get the money we need? My husband has got an acceptance in principal for a Buy to Let mortgage with Virgin but I don't know if they would also look at our income and make a decision on that and say no.

We have had a mortgage with Nationwide for over 25 years, have never missed a payment, bank with them too and am angry that that seems to count for nothing.

[Deleted User]

thecakelady wrote: »

I have contacted the Financial Ombudsman but I'm not holding out much hope of a change in decision.

Why did you do that? The FOS don't decide Nationwide's lending criteria.

thecakelady

Deleted_User wrote: »

Why did you do that? The FOS don't decide Nationwide's lending criteria.

Nationwide sent me the Financial Ombudsman leaflet with their letter in answer to my complaint.

rtho782

Sell the other house if you can't afford to make it rentable. Seems simple to me.

Apart from anything else, if you can't raise £5k, you can't really be a landlord. What if the boiler broke when you had a tenant in there?

thecakelady

rtho782 wrote: »

Sell the other house if you can't afford to make it rentable. Seems simple to me.

Apart from anything else, if you can't raise £5k, you can't really be a landlord. What if the boiler broke when you had a tenant in there?

My husband doesn't want to sell the house just like that, its been in his family for over 80 years and is choosing to rent it out rather than sell it. It only needs a couple of thousand spending on it, the rest of the money was for work on our house and other things. Once the house is bringing in income we would put money aside for repairs.

Can anyone give me any practical advice on getting the money we want to borrow?

Contemptuous

thecakelady wrote: »

My husband doesn't want to sell the house just like that, its been in his family for over 80 years and is choosing to rent it out rather than sell it. It only needs a couple of thousand spending on it, the rest of the money was for work on our house and other things. Once the house is bringing in income we would put money aside for repairs.

Can anyone give me any practical advice on getting the money we want to borrow?

Personal loan? Credit cards?

amnblog

Where did the idea to use Virgin money come from?

Whose name is the property in currently? If your husband's, when did it go into his name?

getmore4less

If it only needs a couple of £k do the work on a 0% purchase CC and get the rent coming in.

Running 2 houses and having no savings is a very risky strategy.

Has hubby any experience of being a landlord and understand all his legal responsibilities?

there is a lot to do before the first tenant moves in.

what rent will this place get?

csgohan4

can you swallow void periods when no tenants insitu or when boiler breaks or roofing needs repairing.


What about eviction costs when tenants refusing rent? could cost thousands


Are you sure your ready to be a LL??? there are tax and legal implications and are you aware of the new tax rules coming in April 2017???


Renting is not a money making machine anymore


In regards to your request to borrowing money from the same bank, loyalty doesn't pay now a days, and your supposed to pay your mortgage, there are no rewards for doing something your supposed to do legally and bound in contract.


Try borrowing elsewhere, but without savings your exposing yourself to the mercy of paying tenants.

rtho782

thecakelady wrote: »

My husband doesn't want to sell the house just like that, its been in his family for over 80 years and is choosing to rent it out rather than sell it. It only needs a couple of thousand spending on it, the rest of the money was for work on our house and other things. Once the house is bringing in income we would put money aside for repairs.

If he doesn't want to sell it he could always keep it empty I guess?

So, as you will put aside money for repairs (or at least you plan to, who knows what will actually happen), it's all fine as long as nothing major breaks during the first 6-12 months of your first tenancy.

If the boiler breaks before then, the poor tenant will just have to live in the cold with no hot water. If the roof collapses, they will just have to use an umbrella.

Or perhaps they could sue you and take the house you want to keep.

I don't want to sound mean but you have a £7k mortgage and the bank won't lend you £5-10k more, which suggests your income is so low that you really have no cushion whatsoever if anything goes wrong.

If you really want a rental property you'd be much better selling the £200k property, buying a £125k one to let, and having a nice big £75k cushion.

getmore4less

Not got all the details but with this scenario.

something along these lines

No spare money
limited cashflow from incomes
small mortgage on main residence
£200k house mortgage free available to rent
(needs a couple of £k on it and the main house needs a bit say £10k.


assuming I even wanted to be a landlord.

£200k house should rent for at least £800pm.

assume 20% tax on the lot £640 net

I would raise £40k on the rental.

Pay off the main mortgage do the work say £20k in total

£20k cashflow fund for maintenance voids cost

interest only 5% £170pm, repayment over 9y £460pm

Pay just the interest and keep the first years rent £5640.
year 2-9 start paying of the mortgage trying to keep the slush fund in the £20-£25k region.


If there are any offset BTL that would be an option and run all the rental income and slush fund within the offset to keep the interest down.

With a lower mortgage rate and low costs could be mortgage free in 6 years with some of the £20k still in the bank.