Right to Buy Additional Borrowing

RandA

Hi,
I'm looking for some advice please.

In October 2014 my husband and I purchased our home under the Preserved Right to Buy.

Now, 2.5 years in we are looking to complete essential home improvements to increase the size of the house, by way of a single story extension.

I have contacted the Housing Association whom we purchased from as per the agreement when the house was signed over to us, they have agreed that we proceed with our works.

We then went to our mortgage lender -the first charge on the property, who agreed our income was sufficient to borrow what we require.

BUT, they are saying that any additional borrowing will be classed as a further charge on the house, even though they have the first charge.

The lender are first charge, the Housing Association are second charge. (Because of the discount that was received when we bought the property). The lender are now saying that the additional borrowing needs to be a second charge and want to push the Housing Association further down the list into third charge, which they are not agreeing to and will not sign a deed of postponement,(I understand why)

Is there a way around this, Is the lender being unreasonable?

I don't feel that we are being being treated fairly because we purchased our home in this way and now we need to complete essential works to benefit the whole family we are being restricted to do so.

We have a 50% equity in the property and nearly the same in savings that we offset against the mortgage and are not wishing to consider for the works due to retirement security. Plus being 2.5years into the discount period the repayment of discount reduces at 20% per year up to 5 years.

Once the work is completed it will also benefit the lender as there security will be worth more!

Surely, borrowing additional funds from the same lender along the existing mortgage should be lumped in together and remain the first charge?

Any help or advise would be greatly appreciated.

da_rule

Lender isn't really being unreasonable, they just want to protect their interest. Are you in a fixed term at the moment? This may be why it has to be treated as a separate charge?

Under Section 156 of the Housing Act 1985 the Housing Association have to give permission for their charge to fall behind other charges when the loan is from an approved lender and is for an approved purpose. One of the approved purposes is to carry out works on the property. You may have to supply them evidence in the form of a quote for the works and show that the amount being borrowed is somewhere near that quote. You may also have to pay them a fee.

RandA

Thanks for responding da_rule.

Our liability to repay is stated as being specified in section 156 of the Housing Act 1985.

Would this be different?

Also, in relation to your other question, we are in a fixed rate period. It is a 5 year fixed that I chose to coincide with the discount period.

Many thanks,

kingstreet

RandA wrote: »

they are saying that any additional borrowing will be classed as a further charge on the house, even though they have the first charge

Why is this?

A further advance should be given under the existing charge.

BTW there's no such thing as a third charge. Each subsequent charge is still a second charge which ranks behind the first charge but has equal ranking with the other seconds.

da_rule

Sorry, my original post should have said s.156.

foxy-stoat

RandA wrote: »

We have a 50% equity in the property and nearly the same in savings that we offset against the mortgage and are not wishing to consider for the works due to retirement security.

Just use your savings, you will be achieving the same result and you wont need to apply for anything.

Your retirement security will be the property and the new property value once the works are complete. Work out the cost of the further borrowing and pay that amount into your savings account to rebuild.