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wits_end_1985

Hi looking for some advice on re-mortgaging.

My partner owns a flat in London which she purchased for £300k in Oct 2019 on an 80% LTV mortgage with Santander.

I own a house in Reading which I was previously owner/occupier but also renting out rooms with the lenders consent. 

Her flat had the loft demised and our plan when she bought was to develop the loft and refurbish the flat using a mixture of our existing savings, soft loans from family members, and other borrowing such as 0% cash advance credit cards and low interest loans, then re-mortgage to clear all of the capital/debt with me being added to the deed and taking out a joint mortgage.

We have now completed the refurbishment and the flat has been transformed from a studio into a 2dbl bed, 2 bathroom duplex which we have had valued at £550k - £600k. We moved into the flat just before Christmas. We have been progressing the joint mortgage with L&C who initially recommended a 3 yr fixed deal with Nationwide but he has just called this morning to say that we don't meet their lending criteria as this is considered 'high-risk, debt consolidation'. Nationwide's view is that we are porting short term unsecured debt into long term debt secured against our property. I understand this up to a point, however I'm a little perplexed - would this not have been the case if we had taken out a dedicated (and more costly) bridging loan? 

We did not have enough equity in the existing flat value pre-refurb to have approached the lender for a loan/equity release to carry out the refurbishment as the valuation would not have been high enough, but supposing it had, that debt would always have been over the term of the mortgage and secured, so to us it's 6 of 1 and half a dozen of the other in terms of how the debt is viewed. 

The value of the mortgage we need to re-pay what we have borrowed to undertake the works is 80% of the new value of the property, which would be a mortgage of £460k. This is bang on 3.5x our joint income. So £460k mortgage at 80% LTV and 4.5x joint income.

It's frustrating as affordability isn't an issue and we are leaving a decent amount of equity in the property. If we are unable to re-mortgage we will need to sell. While that is liable to produce a decent profit for us, my partner will be devastated as we have worked really hard to create what we hoped would be a long term home for ourselves in an area we love.

Are there any lenders or mortgage advisers we can approach who will take a more considered view of our circumstances? Or is there any other general advice out there?

Thanks 

K_S

@witsend1985 First of all, really well-done with the development to the flat!

Just to summarise, if I've understood correctly, you're looking to do a capital raise remo for £460k at 80% LTV. How much of this is the Santander mortgage to be paid off and how much is the debt-con?

Is the background property in Reading on a consent to let?

I know its frustrating, but unfortunately lenders do see consolidation of medium/long-term secured debt and short-term unsecured debt very differently.

wits_end_1985

@K_S

Thanks!

Your summary is spot on.

Santander £260k
Soft loans from friends and family £160k
Credit cards £22k
Unsecured loan £18k

Total £460k

The Reading property is on a consent to let and I am currently looking to move it onto a BTL. 

Thanks

K_S

wits_end_1985 said:

@K_S

Thanks!

Your summary is spot on.

Santander £260k
Soft loans from friends and family £160k
Credit cards £22k
Unsecured loan £18k

Total £460k

The Reading property is on a consent to let and I am currently looking to move it onto a BTL. 

Thanks

@wits_end_1985 The Reading property being on a BTL interest-only mortgage with rental income coming in would definitely take out one complicating/limiting factor. 

The sticking points are likely to be the size of the capital-raise, the quantum of debt being repaid and some lender affordability calculators treating the debt as ongoing, even when it's being repaid. Having said that, unless there are more complicating factors in the background, I would imagine that this should be place-able at mainstream/ish rates, especially if you are willing to compromise down to 75% LTV.

You need a lender that is comfortable with debt-con, able to look at the case on its own merits and use a bit of common sense. Even if the rate is slightly high, you can always just fix for two years and then remo back to a top rate at the end of the fix. At that point it's just a normal like for like remo.

Also with large debt-con remos, there are non-mainstream lenders who will get additional assurance by requiring that the solicitor needs to pay off the debt directly to the different creditors without the cash going to the applicant. 

Assuming they haven't said it's un-placeable, what is L&C suggesting as a next step?

wits_end_1985

@K_S

I did try to move the Reading over to a BTL before we started the application for the, however L&C said they couldn't arrange this as I needed to be able to demonstrate that I hadn't been resident in the Reading property for a minimum of 6 months before switching...despite the fact it's been on a consent to let for 3 yrs now. 

Thanks for the advice, we are definitely prepared to go to 75% LTV and are willing to accept a higher rate and different just to get the mortgage over the line and make all of our family & friends whole so we can get ourselves settled in the property.

L&C have said they are going to review other lenders to see where we will fit the lending criteria. Apparently Nationwide don't publish theirs which was was why he didn't know we would fail to meet it in advance. Would you advise sticking with the process with L&C for the time being or contacting alternative brokers or lenders directly? 

K_S

@wits_end_1985 Unless your credit report is still showing the Reading address on any of the current/recent credit accounts, or you used to live in property until recently (perhaps keeping a room for yourself) I don't really see the significance of the 6 months.

In your place I'd let L&C crack on with the resi (do mention that 75% LTV is ok as that's the debt-con remo cap for a lot of lenders) but for the BTL I'd advise getting a second opinion. If you can get it on an I/O BTL mortgage, most lenders will be able to ignore it when considering your resi app which makes things a lot easier.

wits_end_1985

I did live in the property up until Aug last year so I think that's why. All of my bank details should have London address now, but I will make a point to double check everything to make sure. And I know credit reports can take a few months for information to  wash through.

L&C did advise that having Reading on CTL means that wouldn't affect the amount I should be able to borrow for a resi mortgage. 

Thanks very much for all the advice. I'm hoping we can get everything sorted soon so we can get on with enjoying our home! 

Lou_Ven

This might be a bit of a complicated one, but hopefully someone can help.

I'm a British citizen, but haven't lived in the UK since 2009. I work for a UK company, pay UK tax, and my salary goes into a UK bank account, but I'm a remote worker and have been living as a 'digital nomad' since I left the UK. Covid and post-Brexit changes in our right to spend time in the EU have made this lifestyle excessively complicated and stressful, so I'm looking to return to the UK permanently (likely Scotland).

What are my chances of getting any kind of mortgage, and is there anything I can do to improve them?

Steviek83

 I had a DIP from halifax. Explained prior that i had some defaults. Was told this wasn't an issue due to the age. They are all over 5 years old. Submitted a mortgage application, was asked to provide a covering letter to explain the defaults. Was told this was fine. My Application was then rejected due to me agreeing a payment plan with the company who brought one of the debts. There is no Arrangement to pay markers on my credit file.I Really am in limbo as we've had an offer on a house accepted, all searches etc done.  Any advice would be appreciated.

K_S

Lou_Ven said:

This might be a bit of a complicated one, but hopefully someone can help.

I'm a British citizen, but haven't lived in the UK since 2009. I work for a UK company, pay UK tax, and my salary goes into a UK bank account, but I'm a remote worker and have been living as a 'digital nomad' since I left the UK. Covid and post-Brexit changes in our right to spend time in the EU have made this lifestyle excessively complicated and stressful, so I'm looking to return to the UK permanently (likely Scotland).

What are my chances of getting any kind of mortgage, and is there anything I can do to improve them?

@lou_ven Chances of getting a mortgage - very good, particularly because you're a returning UK citizen and your employment history is UK based. Based on your post I'm assuming you already have a long standing UK bank account so your credit files aren't blank. If you're a high-earner (defined differently by different lenders) then that's a plus as well.

To maximise your chances and choice, it would be best to first move back (family, rental, etc.), change your credit account addresses to a UK one, register on the electoral roll, get a copy of your credit files and make sure it's all clean, and then apply for a mortgage. The bigger a deposit you have (up to 25%, the gains above that are marginal from a criteria point of view) the better. 

Alternatively, you *could* potentially get a mortgage before you moved back, but it would likely be a lot more complicated.