buying at auction-urgent finance

blenny123

Hello all,
I need to urgent advise for my current situation.

I have a house worth 150k with a £300 mortgage.
I have around 100k cash
I want to buy a large bungalow at auction on 29th Nov with a max price of 140k
It will take me 1.5 years to make complete - a lot of work to do as all rooms need re-fitting + extensions/loft extensions etc.
My intention is to pay max 140k for the property by using 100k cash borrow 60k for 6 months? with 20 k remaining 20k to start renovations. Sell my current house in 1 year and move in with the new proper 75% finished.
The auction is 29th Nov and with it being close to Christmas, I would need to complete by 22nd Dec - 3 weeks from auction date.
I have been to Halifax who are my current lender and they said NO to 'additional funds' as they could not transfer/port the 60k funds I asked for for the new property when I sell my current house in 1 year???. I personally think they saw that I had 150k value in my existing property and saw it as a short term loan.
A re-mortgage with another company will take 4-6 weeks so cannot do this. I have heard there are companies that move quick, but the chance of losing my 10% deposit are too great.
I can only think that a expensive bridging loan on my current home is my only alternative...6 month bridging loan then pay this off with a remortgage on current property (LTV 45-50%) at 3-6 months but am also worried that this will also be tricky and some lenders may refuse me a loan to pay off a bridging loan and I have a 2nd property which is not renovated.
Any advise would be greatly appreciated.

RedFraggle

My advice is don't do it

blenny123

Redfraggle...any reason why you say that? It is how many developers have started a business. I am not a developer but this as I see it is normal, but expensive route for property. I can take a hit on fees because if I get the property it will be a very big family home worth £260k -£300k.

G_M

blenny123 wrote: »

Hello all,
I need to urgent advise for my current situation.

I have a house worth 150k with a £300 mortgage.
With a mortgage so small, why not pay it off?
Or do you mean £300K, in which case how come such huge negative equity?

I have around 100k cash
I want to buy a large bungalow at auction on 29th Nov with a max price of 140k ... a lot of work to do....

My intention is to pay max 140k for the property by using 100k cash borrow 60k for 6 months?
Borrow from where?
1) friends/family? Fine, but draw up a Deed and, for their sake, place a Charge on the property.
2) bank loan? expensive, & with so much negative equity you may struggle to get one. Plus make sure you have the loan agreed before the auction
3) mortgage - with so much negative equity you will struggle to get one. Plus make sure you have the mortgage agreed before the auction
4) don't forget the additional 3% SDLT for a 2nd home

with 20 k remaining 20k to start renovations. Sell my current house in 1 year and move in with the new property 75% finished.

* timescales always slip. Your 1 year will be 18 months - 2 years
* Your £20K will go nowhere towards "extensions/loft extensions ". Certainly won't get you to "75% finished". How will you finance the work? And remember,
costs always escalate.
* your sale may take time/generate less than expected.


* have you drawn up a detailed budget?
* have you included all costs in your budget?Materials, labour, Planning & BRs? Legal fees? SDLT? Insurance? Council Tax? Estate agents? etc etc

The auction is 29th Nov and with it being close to Christmas, I would need to complete by 22nd Dec - 3 weeks from auction date.

I have been to Halifax who are my current lender and they said NO to 'additional funds' as they could not transfer/port the 60k funds I asked for for the new property when I sell my current house in 1 year???.
Then talk to an independant mortgage broker.

But as above, I'm still unclear about your current finance - wich seems critical. £300 mortgage, or £300K? !!?

I personally think they saw that I had 150k value in my existing property and saw it as a short term loan.
Wel it is isn't it?
A re-mortgage with another company will take 4-6 weeks so cannot do this.
You would certainly have to get this agreed before 29th Nov. That seems unlikely, but as I said, see an independant broker.

I have heard there are companies that move quick, but the chance of losing my 10% deposit are too great.
Why? Provided you have the finance in place before the 29th Nov you will not lose your deposit.

If you don't have the finance in place, you'd be mad to bid.

I can only think that a expensive bridging loan on my current home is my only alternative...
Contradiction of terms. By definition, a 'bridging loan' is not a mortgage, so is not "on my current home ". It is simply a loan (see the TV ads for quick loans - they only charge about 200% interest I believe.

6 month bridging loan then pay this off with a remortgage on current property (LTV 45-50%) at 3-6 months but am also worried that this will also be tricky and some lenders may refuse me a loan to pay off a bridging loan and I have a 2nd property which is not renovated.
Any advise would be greatly appreciated.

You need to clarify the current mortgage. If it's £300, pay it off and then shop around to remortgage fast.

If it's £300K, you are not financially viable.

Either way, without finance arranged by 29th Nov this is a non-starter.

Moriath

I guess its 300 per month. Might be wrong tho

blenny123

Thanks G-M,
yes a £300 mortgage. Halifax want £200 if I pay it off early so have left it running..it's only £3.77 per month. House value 150k and equity of £147,700.
I understand there will be stamp duty + legal (around 5-6k).
The aim was to use 20k to get a working kitchen/bathroom and temp bedrooms, then when my current house is sold I would use another 50k for large loft extension. Some people live in static caravans for a year so while developing I see my situation as workable, it;s just the urgent finance I need to get me underway.
I have seen an independent mortgage broker but a remortgage is 3 weeks minimum and probably 5 or 6 realistically.
Bridging loan...as I see it, they can lend on an asset (my current,virtually mortgage free home) or on the new property.
I understand finance by 29th is a no-go but I am looking to arrange finance the day after the auction and with my £150k (lets call it mortgage free) current property I would have thought this to be a cert

blenny123

Moriath, yes I know its's odd but Halifax want £200 if I pay it off early so have left it running..it's only £3.77 per month.
House value 150k and equity of £147,700.

davidmcn

G_M wrote: »

By definition, a 'bridging loan' is not a mortgage, so is not "on my current home ".

But bridging loans can be secured loans, so could be "on my current home" and/or "on my new purchase".

RedFraggle

blenny123 wrote: »

Redfraggle...any reason why you say that? It is how many developers have started a business. I am not a developer but this as I see it is normal, but expensive route for property. I can take a hit on fees because if I get the property it will be a very big family home worth £260k -£300k.

Because you have portrayed it as if you are trying to fly by the seat of your pants on an auction property.

blenny123

Redfraggle...I disagree. I have £149,700 locked up in my house value and 100k cash. I think what I am suggesting is feasible, I just need to unlock some of the £149,700 equity and have access to it within a 3 week timeframe. Hence bridging loan then remortgage to pay off bridging loan.

G_M

I repeat:

If it's £300, pay it off and then shop around to remortgage fast.

.......

Either way, without finance arranged by 29th Nov this is a non-starter.

(and there's always a redemption fee on a mortgage. The £200 Halifax want may be higher eg if in a fixed period product, but clearly not a lot higher. Getting rid of that mortgage will make a new ne easier to find.