Equity loan or similar on inherited house, whilst renting elsewhere

jessimac

Dad passed away recently and I now own his bungalow. Did put on market for reasonable £190k but lot of people making cheeky offers. Did reluctantly accept £165k offer but now buyers are being very greedy and taking more advantage, wanting this and that included etc. Seems a bad time to be selling, but my money situation is tight.

I'm in my 60's and I live a distance away in a reasonable rented property, with a couple of lodgers which covers rent etc. However due to Covid and being self-employed hair stylist, have been forced to build up credit card debt to keep afloat.

Ideally I would keep my Dad's house (to have a property I own for later life emergencies) and rent it out, but that would take money as well, as needs probably £10k spending on plumbing and electrics etc. to get in a state to rent out.

Given my financial situation (no job at the moment, low earner) is there any way I can get a loan of say £30k based on the value of the mortgage-free bungalow? That would pay off my £10k credit card debt and give me enough to do up the bungalow and then get some money coming in from that (I could then look for even a minimum wage full-time job once bungalow works finished, which would also help to repay any equity loan or whatever).

It would also mean that if I do decide to sell the bungalow further down the line, I could hopefully get £190k minus whatever is left owing on the loan.

Thanks for any advice.

[Deleted User]

Without a job, no.  Your best bet is to sell it.  You may get 30k less than you want, but you'll still have 160k more than you do now.  

You probably don't want the stress that comes with being a landlord.

chanz4

Been a landlord isnt fun or even profitable these days

[Deleted User]

You could potentially get an equity release product rather than a mortgage since you have a lack of income at the moment.  Although I think selling it would probably be the wiser move.

jessimac

Hello. Did a walkaround of various building societies and financial advisers - the former all said that evidence of present income (even pension) was a requirement. However having no job at present and so no income (though obviously intend to remedy that) is apparently not a problem, for a partial mortgage from the subsidiary of a national bank (to get money to refurb, to then rent out). Hope this info helps others in same situation. I'll wait until definitely confirmed and reliable info before posting more.

Grumpy_chap

chanz4 said:

Been a landlord isnt fun or even profitable these days

I disagree.  If managed properly, being a landlord can be profitable and, if that were not the case, there would simply be no rental properties.

For the OP (commiserations on your loss), I strongly recommend that they take some advice from an Accountant and / or IFA.  Here are some observations on the stated position that are worthy of consideration:

1. What is the true value of the bungalow?  If £190k in livable / rentable condition, but needs £10k or more to get to livable / rentable condition, then that closes the gap towards to the offer at £165k.
2. OP prefers to keep the bungalow and rent out.  That is what I would do, but the OP needs to assess this decision against their resilience and also the return they can get if they simply sell the bungalow and invest the proceeds in another way.  Also the efforts to manage a property that the OP is not local to.
3. OP lives effectively rent-free (covered by lodgers) and does not sound like she has unusually high outgoings / extravagant lifestyle.
4. OP is self-employed hair stylist and business has been impacted by coronavirus, but it is not clear why this has forced credit cards to keep afloat.  There are forms of coronavirus support that the OP may be eligible for:
5. a. does the OP have their own salon or "rent a chair"?  If the former, then either Small Business Grant and / or Retail, Hospitality and Leisure Grant may be available.
6. b. OP is self employed, so why don't they qualify for SEISS grants?  
7. c. OP can take advantage of tax deferrals.
8. d. OP may be eligible for bounce-back loan.  Depending upon her turnover, this may be sufficient to generate the level of loan she now needs (though there are rules about transferring that from the business).
9. If the OP looks to borrow them as self-employed, she will be assessed on past income via SA302.  Current income is less significant (though the wisdom of borrowing with no income is to be assessed).  A good mortgage broker will also consider the rental income as part of the assessment.  As a hair stylist, once the lock-down is lifted (I think that could be as early as 4th July), the OP's business should pick up very quickly to pre-covid levels as there'll be a queue of her customers desperate for a cut and blow-dry.
10. Finally, given the OP's age, she may be able to draw pension if she has one, taking the lump sum and then monthly payments.

So, a lot of options here for the OP to consider and not something that can be reliably assessed in a public forum.  The OP needs to review possible steps and then get the appropriate professional advice.

jessimac

Dear GrumpyChap, thanks for the considered and detailed reply, with many positive suggestions.

To answer your questions:

1- value definitely £190k, as clean and tidy, but no extension, older boiler etc. etc. so if sold to a builder they would probably do it up and sell for £230k. My expenses to make it 'rentable' (including sorting out the c/h) would be about £5k.

2. - I'd pay for a lettings agent - the % would be worth it.

3. - That's me!

4. - Self-employed but working in a salon, salon owner not the best, and so little in the way of grants available. Did get a SEISS grant, but buttons (compared to CC debt). Same goes for 6-8,.

9. Yes, hopefully people don't get a taste for long hair and we go back to the Sixties!! I have been very upfront with the financial guy, told him the full story, and he still came back with a very decent Buy-To-Let mortgage for £30k, from a subsidiary of a known bank (won't post details in case it falls through on further checks).

Thanks, agree about making sure I get professional advice - if that exists!

Grumpy_chap

If you qualified for the first SEISS grant, you should also get the second grant when it is paid.

As you qualified for SEISS, you are also eligible for a bounceback loan (BBLS).  Consider that as an alternative to the BTL mortgage (subject to rules of the BBLS).

Good luck in sorting the decisions and making this all work for yourself.

jessimac

Dear GrumpyChap - thanks for the extra info, will report back.

Mickey666

Is there no possibility of the OP just moving into the property?  I realise relocation might be difficult but it would mean an immediate saving on rent (well, when the tenancy can be exited) and being a hair stylist I'd like to think work would be fairly easy to find in a new location.  It need not even be a permanent move, but it might buy some time during which to find a better sale price.  Quick, urgent sales are always going to be at the mercy of someone look to make for a quick buck - yours!

Using a credit card is no way to 'keep afloat' it will only prolong the inevitable sinking.

Otherwise, bite the bullet and sell for what you can - it will be an improvement on your current situation, though it's probably not maximising the potential of your position in the longer term.