Good position but nobody will lend

surreyben

Hi all,

Really struggling to get any sort of mortgage - with only current option looking like a very expensive second charge (and even that is far from certain). I think we are in a pretty healthy position, but for various reasons we need to borrow a little more, and reasonably urgently.

Both the property and our situation is non-standard, with commercial aspects, which seems to put off almost all lenders. We no longer seem to qualify for anything residential, but we also don't seem to be commercial enough to get a commercial mortgage.

Our property has recently been valued at £1.1m, and we have a mortgage of approx £90k. Also have a personal loan of approx £30k, plus £9k on a 0% credit card, plus about £3k on another credit card. We're self-employed, with joint earnings of about £41k (with SA302s to prove it). We want to borrow another £30-70k.

House is surrounded by 30 acres of land, plus outbuildings (barn, double garage/workshop/laundry, and unfinished office building). Last September, we finished converting the dilapidated barn next to our house into two holiday cottages. We're in a touristy spot and off-season occupancy has been exactly 50% since we started - projected yearly takings are at least £60k. We have recently incorporated a company for the cottage business. So joint earnings will be going up to something approaching £100k.

We could split the title to the land, but planning restrictions mean we can't divide the house/barn title.

We can't do anything with our existing lender, because of the amount of land (they have tightened their policy on this since we got the original mortgage), and because of the holiday cottages (computer says no). Discounted period comes to an end in July.

I feel I have pretty much exhausted the residential options - unless someone can think of something I might not have tried - but I haven't got as far with business/commercial possibilities. I don't have any experience with commercial stuff, and I'm not really sure what's possible.

Main questions are:

Do you think current lender will allow us to get a new product (with no increase in borrowing) once our current discounted period is up? If we can't get another mortgage, then we're stuck with what we've got - but obviously would prefer not to go up to the standard variable rate.

What is best option for getting a second charge mortgage? I have tried a few brokers, and fees are astronomical (e.g. £5k for fees and valuation, on £60k borrowing!).

Do you think any sort of business lending is going to be possible? Commercial mortgage? Some sort of secured business loan for new businesses (if such a thing exists and is possible on top of the first charge mortgage)?

What have I not thought of here??

Many thanks for any help and advice you might be able to give.

getmore4less

How urgent is the need for ALL the money now?

According to your projection you will have £60k+ spare this year.

Also £30-70k is very vague.

The £42k debt on top of a £90k mortgage won't be helping


There may be option linked to the use of the money but you have not said what it is for.

ACG

Ask your current lender about how you switch deals at the end of the product. Most high street lenders have an online process where it is quick and simple.

There are 2 reasons why second charge brokers are charging high fees:
1) This is not an easy case to place as you have found. There will be quite a few calls to make.
2) It is a £60k Mortgage so commission will be low.

There are probably ways to get that £5k down a little to maybe £3k if you shop around and try some other broker, but it is still fairly high.

I think you will struggle with a first charge (mortgage) lender, it could be worth trying a local building society? They can sometimes be a little more flexible if it is an area they know and it is a low risk case.

Mortgage_Adviser

surreyben wrote: »

Hi all,

What is best option for getting a second charge mortgage? I have tried a few brokers, and fees are astronomical (e.g. £5k for fees and valuation, on £60k borrowing!).

What does 5k consists off? How much it actually the broker fees and how much are lender fees eg valuation, product fees etc?


Also, How old are you both?

surreyben

getmore4less - we do need the money now, and can't wait until later in the year. £30k would just about cover it... you're right that the rest could wait until later in the year if necessary.



What we certainly will be doing is using the future earnings to pay off the additional debt asap. Higher interest rates for second charges and/or business lending aren't so much of a concern - the amounts aren't massive, and we'll be paying off quickly.



The purpose of the £30k would depend on how you want to spin it - either to finish home improvements (urgent) and the building of our home office, or to help start-up of business and cash flow. The latter would naturally flow into the former.


Long-term plan is to replace existing debt with a new (commercial) mortgage once we have 2 or 3 years of accounts showing increased earnings.

surreyben

Mortgage_Advisor - we're both in early 40s.


Had roughly £5k quoted by one broker, but have just found another quoting:


£1500 broker fee
£1350 lender fee (2.25% of 60k) - obviously would be less if we borrow less

£1000 valuation


Plus solicitors fees etc, I guess.

silvercar

Have you looked at P2P lending from the likes of zopla?

Mortgage_Adviser

OP, so the title of your post says that no one will lend, but as you have mentionned above you have found the brokers who can help you.
It is just you don't want to pay the fees?

getmore4less

surreyben wrote: »

The purpose of the £30k would depend on how you want to spin it - either to finish home improvements (urgent) and the building of our home office, or to help start-up of business and cash flow. The latter would naturally flow into the former.

At least some of it needs to be included as part of the business plan, if you can't recover the extra costs of the borrowing from the increased business then delay.

However you spin it your last/current plan run out of money and you need more, lenders can see that.

Could you look at multiple sources,

A purchase credit card could store up regular spending and purchases for work getting done.

What about factoring rental bookings offer a discount for a larger non refundable deposits to get the cash flow forward.

home office can that not wait

Can you get credit terms from any suppliers for the work and office to spread the cash requirements into the high season cash flow

You have 3 months low and 3 month high, that's 30k ish in the next 6 months can't you create a plan that works with that.

Thrugelmir

surreyben wrote: »

The purpose of the £30k would depend on how you want to spin it

Nothing worse than being vague.

We're in a touristy spot and off-season occupancy has been exactly 50% since we started - projected yearly takings are at least £60k.

Projections mean little. You need to establish the business with a solid track track record.

getmore4less

On £60k projections and 50%occupancy for 3 months what has happened to that £10k?
(based on 6months 50% 6month 100%)