Right to Buy to Permitted Developments to Defaults and everything in between!

unforeseen

Also consider what, if any, covenants get included limiting your ability to develop. Some councils limit development for a number of years, other prevent loft conversions on terraced houses etc.

warby68

I know little about RTB but are you really allowed to gear up using the discount/equity element during the period that the discount is repayable?

OP seems to want the extension short term so won't that be a major stumbling block?

AdrianC

elaine77_04 wrote: »

2. We only want to buy our house if we can extend it with a rear extension and loft conversion as parts of the house will be too small once our children reach their teens and we need a bit more space. We have spoken to architects and builders and we don’t foresee any issues with getting a rear extension and a loft conversion (other than the cost of course) and so, ideally, we want to use the ‘discount’ we get to fund the extension but we also need the discount to act as our deposit as we don’t have sufficient savings

I'm not sure you understand how the discount works.
Let's say the full value of the house is £100k.
You are due a 42% - £42k - discount.
You are buying the house for £58k.
You still need to get a mortgage.

The lender may well say "that's 58% loan to value, because the full value is £100k" - in which case, you don't need to put any equity of your own into the purchase.

You could then, I s'pose, remortgage for <say> 80% LtV, £80k, and use the other £22k for the extension.

3. The problem however, is that until very recently I worked for Local Government and in 2017 I was faced with either being made redundant or taking a different role within the Council but for a much lower salary. Obviously any employment is better than no employment and so I took the lower paid role. Unfortunately though this meant that I had to default on my two highest credit accounts
...
also any mortgage would be in my name alone on my income alone as we don’t want to mortgage ourselves to the hilt in case anything ever goes wrong in future again like in 2017.

That's certainly not going to help you get a mortgage.

- do I have a better chance of success with Barclays for the mortgage because the only debts I have are with them?
...
- do I have a better chance of getting a mortgage with my current bank (LLoyds) as they can see my wages and how healthy my bank account is now

You're going to need to give any potential lender access to your financial history, so they'll all take similar account of the circumstances they can see. There's no loyalty these days.

I should add that I have been offered settlements on the 2 debts but financial advice I have taken is that partially settled accounts won’t help my credit rating one jot (and might make it worse) and so I’d be better not paying to settle the debts.

I'd have thought that having two closed, settled debts on your history would be better than two open, outstanding ones.

elaine77_04

seven-day-weekend wrote: »

I can say that they should not normally need planning permission for a loft conversion, as long as they do not have a dormer on the front. The exceptions would be if the property is a listed building, or in a conservation area, or had Permitted Development rights removed.

As for a rear extension, that too could come under Permitted Development, depending upon the size.

Thank you for replying; we have been told that the loft conversion (window to the rear) and extension (also to the rear) would all fall under PDR and so we shouldn’t need planning permission as our property doesn’t fall under any exemption, we have a large garden, and we back on to woodland. It is more the mortgage advice I need and hence I was hoping maybe others had mortgage experience or been in a similar position with a mortgage.

[/QUOTE=anselld]Have the defaults been settled? This will greatly improve your mortgage chances[/QUOTE]

I have taken financial advice from an IFA who has advised not to settle the two debts as it won’t help my credit rating and may make it worse. Apparently partially settled debts are just as damaging, if not more damaging, than the defaults and remain on file for the same length of time.

[/QUOTE=babyblade41]I think you should think again as you have not managed to save for a deposit with 2 good salaries whilst living in social housing, also with 2 defaults your money management isn't great either

Try looking outside your area, doesn't have to be miles away and see if something larger comes into your price range that requires no extensions[/QUOTE]

Again, it wasn’t money management, I had to take an unexpected significant drop in salary so the two largest debts couldn’t be paid, the money management issue was simply that we didn’t have enough savings to cover significantly large sums of money.

Again, you seem to be suggesting I can’t afford RTB but can afford on the open market? I’m confused by this advice as I have already explained that we do not have the significant deposit required to buy on the open market and hence why RTB is our only option of getting on to the housing ladder. It seems you don’t think my money management is bad enough to buy on the open market but it is too bad for me to buy my current home under RTB? Confusing....

Also, we can comfortably afford a mortgage to the FULL value of the house and the extension work can all be completed within the amount of the 42% discount on the house. The mortgage just on the remaining 58% of the house would work out cheaper than our current rent so affordability is not in question here it is the ability to get a mortgage with the two defaults, the best way to do that, and whether using the discount/equity to extend the house would be feasible.

elaine77_04

warby68 wrote: »

I know little about RTB but are you really allowed to gear up using the discount/equity element during the period that the discount is repayable?

Thanks for your reply; yes this is my worry, I’m not sure whether you can utilise the discount/equity when you RTB because if I was to sell within 5 years the Council could request a proportion of the discount back which would leave less equity in the house for the lender which would reduce the attractiveness of giving me a RTB mortgage where they get instant equity if I default on the mortgage, which therefore reduces their risk. On the other hand, why would we sell the house in the period where we need to pay back the discount because we wouldn’t have any equity and wouldn’t benefit financially from doing that so I still think it is a low risk.

Obviously we don’t ever plan to sell the house hence why we want to extend it but the lender obviously has no guarantee of this.

csgohan4

RTB has it's own disadvantages as above have explained

if your the leaseholder, your going to be at the mercy of the HA/Council for repairs which you will be fully responsible for and lose your secured tenancy

Generally you can only borrow the value of the house, not extras such as renovation, only if you remortgage and have equity then you can borrow more

Good luck, but if your struggling now, you will struggle more when you own a house, There are people on here who have spent 50k+ on fixing things and renovations

https://forums.moneysavingexpert.com/discussion/5856039

https://forums.moneysavingexpert.com/discussion/5789909

elaine77_04

csgohan4 wrote: »

RTB has it's own disadvantages as above have explained

if your the leaseholder, your going to be at the mercy of the HA/Council for repairs which you will be fully responsible for and lose your secured tenancy

Generally you can only borrow the value of the house, not extras such as renovation, only if you remortgage and have equity then you can borrow more

Good luck, but if your struggling now, you will struggle more when you own a house, There are people on here who have spent 50k+ on fixing things and renovations

Thanks for your reply. The property is freehold so there is no lease it’s just a normal semi-detached house so we either buy it ourselves or we live in it for the next 50+ years and pay rent which won’t be much different to the repayments on a mortgage. I know we will be responsible for repairs but to be honest we have always paid for most of this ourselves anyway as we have changed things within the house such as internal doors and bathroom suite etc...

We’re not struggling already and we weren’t really ‘struggling’ even in 2017 we just unfortunately had to lose out on two debts to make sure we could afford everything else; priorities had to shift due to circumstances out of our control but things like that can happen to absolutely anyone no matter what type of house or mortgage they have.

ACG

- should I continue with the RTB or will I have to take a really bad deal due to the recent defaults on my credit rating? - With 2 recent defaults, you are unlikely to get a market leading deal. Realistically you are probably looking at rates of 4-5% but there may be the potential for high street rates if the defaults are cleared in full sooner rather than later.

- do I have any chance of using the discount to take on top of the mortgage to carry out the extension work or will they refuse this outright because of the defaults and the fact that the only chance I might have of getting a mortgage will be their guaranteed 42% instant equity?
- No. Some lenders will offer the amount you need plus a small amount on top for improvements but nowhere near enough for an extension and conversion.

- if I can’t take the money on top should I still take the RTB and then remortgage to release the equity to carry out the improvements once the defaults fall off and I can get a good deal?
- Not possible. There will be restrictions from the council.

- do I have a better chance of success with Barclays for the mortgage because the only debts I have are with them? (They were really kind about the issues as they could see my wage change as I’d banked with them forever and so they issued the defaults immediately and didn’t chase me for any money or anything as they could see the change in my wages themselves as I banked with them at the time).
- If you have 2 defaults with them, I would say that reduces your chance. You also have to put down a deposit with Barclays in addition to the discount (or you used to at least).

- do I have a better chance of getting a mortgage with my current bank (LLoyds) as they can see my wages and how healthy my bank account is now and has been for the past 2 years since I began banking with them (and could use Barclays as a bargaining chip maybe)?
- You can not use anything as a bargaining chip. You either fit or you dont. There are exceptions but RTB with credit issues does not give you much bargaining power (sorry to be so direct).

- should I just scrap the whole RTB and wait until the defaults drop off in 6 years time (not really the best course of action for us as a family as my eldest will be 17 by then and her teen years wasted in a too-small council house).
- You do not necessarily need to wait 6 years, but time is the greatest healer. If you are not going to be happy with rates in and around 5%, then you will probably need to wait for probably 1-2 years.

---

There is also no real reason not to include your husband. You are looking to borrow 58% of the property value. That will be the same with him on it or not. By not having him on it, you are probably reducing your options even further.

AnotherJoe

Are you proposing to never pay these debts off ? Have the lenders written them off? Doesn't sound like it.
Why cant you buy the house now (if you can get a mortgage) and then wait until debts are paid / 5 year period is over then remortage then extend ?

babyblade41

My worry would be the 2 defaults . Yes things do happen and you have been unable to save for a deposit and slipped up twice.

I really think you need to do an affordability statement for your own peace of mind.

Home ownership comes with lots of extra financial pitfalls and you seem to want to take out loans onto of loans with no real financial contingency plan.

If it were me I'd keep things as they are .. your affordability criteria as it stands, doesn't sound like you'd get a positive rate and then you want to add to it even more