Deposit/equity/proof of funds

ghostghost

Hi guys I'm in an annoying situation you maybe able to advise on. I'm looking to buy my second property and have been very lucky in buying it cheap and the market explosion where I am. Essentially, going on the estate agents valuation I should have at least 125k equity. I've found a new build which will be completed in December for 345k, I earn 55k a year and with that equity I'm told I shouldn't have a problem getting a mortgage and can get a decision in principal on those grounds

However, the developers now tell me that I should have the deposit liquid and able to show it as proof of funds. So essentially I'll have to sell and hope they still have some homes left. Is there anyway around this?

G_M

'Buying a 2nd property' implies you ill own 2 properties. So would pay the additional 3% SDLT on the 2nd property.

However you then talk of equity - I assume in your current (1st) property. Yes?

Do you plan to release this equity by re-mortgaging, or by selling?

Either way, if the developer wants to see liquid cash before they'll agree to a sale, then so be it - they can sell (or not) to whoever they choose.

But it seems a strange condition.

ghostghost

You're right, poor wording by me. I plan on selling my current property to fund my purchase/release equity. I thought it was a strange condition too. I've asked them to speak to their sales manager because I thought it was odd to see if there's any way around it. .

Thrugelmir

Turn the question around. If you don't sell your property by December. How would you complete the purchase. At this early juncture the developer might not be willing to take the risk.

ghostghost

Yeah I can understand from their perspective but it sure is restrictive. It's also annoying knowin I can sell it quickly but it's a big risk because any investor with a bag of cash could come in and take the last few. Argh.

Thrugelmir

There's not many investors that walk around with £350k in cash.

ReadingTim

If you've been overpaying the mortgage, could you not borrow those overpayments back, stick them in a savings account and show that to the developer as proof of deposit? Somewhere between £30k-50k should probably do it.

However, if all of your deposit is basically being funded by house price inflation, then despite your salary, you haven't actually been doing any saving, therefore it's hardly surprising the developer doesn't think you're in as good a position as you do. Fail to sell your current place before it's time to pay for the new place, or sell it for less than you expect, and you might not have enough cash - which is not a chance the developer wants to take.

kingstreet

ghostghost wrote: »

Hi guys I'm in an annoying situation you maybe able to advise on. I'm looking to buy my second property and have been very lucky in buying it cheap and the market explosion where I am. Essentially, going on the estate agents valuation I should have at least 125k equity. I've found a new build which will be completed in December for 345k, I earn 55k a year and with that equity I'm told I shouldn't have a problem getting a mortgage and can get a decision in principal on those grounds

However, the developers now tell me that I should have the deposit liquid and able to show it as proof of funds. So essentially I'll have to sell and hope they still have some homes left. Is there anyway around this?

Your buyer's deposit, as is usually the case?