Remortgage advice on property to be demolished

pedgepuk

Hi all,

I live in an ex council property which is due to be demolished between 4-6 years time as the area is undergoing a mass redevelopment plan.

My last mortgage deal ran out in March of this year and since then i've been stung on the interest rate rises by a near £100 more a month compared to 12 mths ago. This is due to me deciding on going on a tracker with my provider Abbey. The reasons behind me going on a tracker was due to my plan of selling up and buying somewhere else so I needed some flexibilty without the redemption penalties. This has now changed.

Since i'm £100 worse off /mth and i'm not planning on selling in the near future but instead considering letting the property out, I was recently advised to take out an interest only mortgage with the possibility of extending it from 21 years to 30 years. The main reason behind this was to do 'avoid' repaying the capital on a property which won't exist in a few years. With this option I could probably save upto £200 /mth. I have savings so there's no problem in covering the repayment part at a later date.

The problem I have is due to the property being potentially demolished in 5 or so years, i'm concerned as to the conveyancing surveys being conducted for the remortgage, which may result in my remortgage application being declined if I move away from Abbey due to any planning permission already being submitted to the local authority.

The mortgage is only £90k and the property is worth approx £200k.

The questions I have are:

- Would remortgaging to an interest only mortage be the best option in my situation?
- Does anybody have knowledge on the conveyancing process of a remortgage if moving to a different bank? Do they do a full check with the local authority?
- Any recommendations on a mortgage deal?

TIA

P

silvercar

What happens in 4-6 years time, do you get compulsary purchased at full market value?

The repayments on an interest only mortgage will be the same whether it is 21 or 30 years long.

I can't see you getting away with a remortgage application without declaring that the property is going to be demolished; its key information for a lender.

I'm guessing that only a small proportion of the area to be demolished is privately owned, this on its own could limit the lenders prepared to offer you a mortgage.

elvis_girl

I can't see you getting a remortgage on a house due to be demolished to be an honest. This would surely show up on any searches done during conveyencing & couple that with the "credit crunch". Maybe you could ask Abbey for a better deal?

Dan_Collins_2

Call Abbey early in the morning and say you are about to sign on the line with another lender, I bet they come up something for you. The only lenders that would not check and would take out an idemnity insurance against any dodgy legal work would charge to high a rate.

I agree with the interest only option as you wont pay back much in 4-5 years. If you let it even more so.

pedgepuk

silvercar wrote: »

What happens in 4-6 years time, do you get compulsary purchased at full market value?

The repayments on an interest only mortgage will be the same whether it is 21 or 30 years long.

I can't see you getting away with a remortgage application without declaring that the property is going to be demolished; its key information for a lender.

I'm guessing that only a small proportion of the area to be demolished is privately owned, this on its own could limit the lenders prepared to offer you a mortgage.

Yes, we have been informed that we will get market rate (whatever that means) plus 10% compensation of the market rate value.

Knowbody really knows what this 'market rate' is defined as. Some say that it's the the middle value of what the property value was purchased at to what its worth now,
i.e.
If the property was purchased at £100,000 and it's worth £200,000 then they would only give you £150,000 + 10% (£15,000).

I have read along the lines that the VOA (Valuation Office Agency) will value the property to determine the market rate. For all we know they could value it really low and we'll be stuffed.

Still not sure why I should inform the bank about the plans if it would be their legal department who would have to do the checks. Since i'm going to receive this 'market value' which will cover the mortgage repayment to the bank then in my opinion I don't see this as being a problem to the bank, may be they see things differently.

silvercar

MArket value should mean what it says!


The problem comes if there are a lot of empty properties around. Presumably the council will start rehousing their tenants a year or two before demolition. Boarded up properties don't improve the area and could affect market value.

elvis_girl

Presumably whatever you get will be enough to clear your current mortgage? I'm not sure what is asked on the application form for a remortgage, but surely a compulsory purchase order would show up on the conveyancing?