Mortgage broker - ask me anything

MartusJK

HI there, I put this question on the forum but got no replies so hoping I can get some guidance here

I am in the process of buying a new property for cash, but after I have moved in there is some reonovation required, probably ~£20K and I wont have much cash left after buying it. SO my plan was to complete the property purchase, then take out a small mortgage for this work (cheaper than a loan). However it seems impossible for me to use the online mortgage calculators, like MSE, to get an idea of likely payments because they only seem to allow options for a new mortgage (for a whole new property) or remortgaging (with an existing mortgage) and my requirement doesnt fall into either, so other than painstakingly contacting each lender can anyone advise how to get to easily see some comparable deals? Or am I missing something? Or maybe I should go about this a different way ? (I could be persauded otherwise but I thought it best not to include even a small mortgage as part of the buying process as it would remove my "preferred status" as a cash only buyer - which helped me secure this particular property -  and introduce potential complications and delay to the buying process). Many thanks in advance, I presume I cant be the only person with this situation?

K_S

MartusJK said:

HI there, I put this question on the forum but got no replies so hoping I can get some guidance here

I am in the process of buying a new property for cash, but after I have moved in there is some reonovation required, probably ~£20K and I wont have much cash left after buying it. SO my plan was to complete the property purchase, then take out a small mortgage for this work (cheaper than a loan). However it seems impossible for me to use the online mortgage calculators, like MSE, to get an idea of likely payments because they only seem to allow options for a new mortgage (for a whole new property) or remortgaging (with an existing mortgage) and my requirement doesnt fall into either, so other than painstakingly contacting each lender can anyone advise how to get to easily see some comparable deals? Or am I missing something? Or maybe I should go about this a different way ? (I could be persauded otherwise but I thought it best not to include even a small mortgage as part of the buying process as it would remove my "preferred status" as a cash only buyer - which helped me secure this particular property -  and introduce potential complications and delay to the buying process). Many thanks in advance, I presume I cant be the only person with this situation?

@martusJK This is a fairly common scenario (except for the small loan size) with BTL landlord buyers who buy the property for cash (for reasons of speed and attractiveness to vendors) and then take out a BTL mortgage against the property after completion to release the tied-up cash.

With the vast majority of lenders, taking out a mortgage against a currently unencumbered (mortgage-free) property will be considered as a 'remortgage', so just use that to find rates. Do keep in mind that quite a few lenders will not accept an application until it has been 6 months since completion so do check that before applying.

Another limiting factor will be the loan size of 20k. Lots of lenders have remo floors of 75k-50k-25k-5k so do check that as well.

MartusJK

K_S said:

MartusJK said:

HI there, I put this question on the forum but got no replies so hoping I can get some guidance here

I am in the process of buying a new property for cash, but after I have moved in there is some reonovation required, probably ~£20K and I wont have much cash left after buying it. SO my plan was to complete the property purchase, then take out a small mortgage for this work (cheaper than a loan). However it seems impossible for me to use the online mortgage calculators, like MSE, to get an idea of likely payments because they only seem to allow options for a new mortgage (for a whole new property) or remortgaging (with an existing mortgage) and my requirement doesnt fall into either, so other than painstakingly contacting each lender can anyone advise how to get to easily see some comparable deals? Or am I missing something? Or maybe I should go about this a different way ? (I could be persauded otherwise but I thought it best not to include even a small mortgage as part of the buying process as it would remove my "preferred status" as a cash only buyer - which helped me secure this particular property -  and introduce potential complications and delay to the buying process). Many thanks in advance, I presume I cant be the only person with this situation?

@martusJK This is a fairly common scenario (except for the small loan size) with BTL landlord buyers who buy the property for cash (for reasons of speed and attractiveness to vendors) and then take out a BTL mortgage against the property after completion to release the tied-up cash.

With the vast majority of lenders, taking out a mortgage against a currently unencumbered (mortgage-free) property will be considered as a 'remortgage', so just use that to find rates. Do keep in mind that quite a few lenders will not accept an application until it has been 6 months since completion so do check that before applying.

Another limiting factor will be the loan size of 20k. Lots of lenders have remo floors of 75k-50k-25k-5k so do check that as well.

Many thanks for your quick and helpful reply, yes I see now, I have to use the remortgage option and then put the full current value minus my £20K as the deposit.

If I may ask another quick question, is there any way to get around the early repayment charge that most mortgages seem to have now? As I am an older retired person I want to take out a short mortgage term of about 5 years to clear it as soon as i can, but if I try hard I might be able to do so earlier than the 5 years which I feel is a "good" thing to do, it takes a burden from me and reduces the banks borrowing - but they penalise you for it! So one way I thought to get around it is if I could I overpay most of it earlier and then just leave a small amount to run on until the full term ends? Or will they keep collecting payments at the same rate and then just charge me for early repayment when its all paid off early? Any other solutions appreciated to help against what i feel is a very bad disincentive to trying to pay off your debts early!

K_S

MartusJK said:

K_S said:

MartusJK said:

HI there, I put this question on the forum but got no replies so hoping I can get some guidance here

I am in the process of buying a new property for cash, but after I have moved in there is some reonovation required, probably ~£20K and I wont have much cash left after buying it. SO my plan was to complete the property purchase, then take out a small mortgage for this work (cheaper than a loan). However it seems impossible for me to use the online mortgage calculators, like MSE, to get an idea of likely payments because they only seem to allow options for a new mortgage (for a whole new property) or remortgaging (with an existing mortgage) and my requirement doesnt fall into either, so other than painstakingly contacting each lender can anyone advise how to get to easily see some comparable deals? Or am I missing something? Or maybe I should go about this a different way ? (I could be persauded otherwise but I thought it best not to include even a small mortgage as part of the buying process as it would remove my "preferred status" as a cash only buyer - which helped me secure this particular property -  and introduce potential complications and delay to the buying process). Many thanks in advance, I presume I cant be the only person with this situation?

@martusJK This is a fairly common scenario (except for the small loan size) with BTL landlord buyers who buy the property for cash (for reasons of speed and attractiveness to vendors) and then take out a BTL mortgage against the property after completion to release the tied-up cash.

With the vast majority of lenders, taking out a mortgage against a currently unencumbered (mortgage-free) property will be considered as a 'remortgage', so just use that to find rates. Do keep in mind that quite a few lenders will not accept an application until it has been 6 months since completion so do check that before applying.

Another limiting factor will be the loan size of 20k. Lots of lenders have remo floors of 75k-50k-25k-5k so do check that as well.

Many thanks for your quick and helpful reply, yes I see now, I have to use the remortgage option and then put the full current value minus my £20K as the deposit.

If I may ask another quick question, is there any way to get around the early repayment charge that most mortgages seem to have now? As I am an older retired person I want to take out a short mortgage term of about 5 years to clear it as soon as i can, but if I try hard I might be able to do so earlier than the 5 years which I feel is a "good" thing to do, it takes a burden from me and reduces the banks borrowing - but they penalise you for it! So one way I thought to get around it is if I could I overpay most of it earlier and then just leave a small amount to run on until the full term ends? Or will they keep collecting payments at the same rate and then just charge me for early repayment when its all paid off early? Any other solutions appreciated to help against what i feel is a very bad disincentive to trying to pay off your debts early!

@martusjk You do have a handful of no-fee mainstream tracker-rate products (offered by Nationwide and Skipton) in the market which allow unlimited ERC-free overpayments. That may possibly meet your requirements for flexibility.

Off of the top of my head, Nationwide does consider day 1 (ie where the applicant has owned the property for < 6m) capital-raise remos and Skipton doesn't.

karma_police

Hi, I put this question in the debt section of the forums, but it was suggested I might be better posting here as well. 

OK, simply put, currently we have some debt, the remnants of a loan, and various credit cards. We are due to be inheriting funds in due course that will not only allow us to clear these debts in full, but also help us onto the housing ladder, we will be needing a mortgage as well. My question is simple, in order to maximise our chances of getting that mortgage, should we clear all debt immediately and in full, or maybe clear the bulk, but leave a small amount on all cards to maintain a healthy credit used/credit taken ratio. I'm concerned that if we clear all the balances to zero in one hit, some of these card companies may reduce the limits or close accounts completely. Any advice? TIA. 

K_S

karma_police said:

Hi, I put this question in the debt section of the forums, but it was suggested I might be better posting here as well. 

OK, simply put, currently we have some debt, the remnants of a loan, and various credit cards. We are due to be inheriting funds in due course that will not only allow us to clear these debts in full, but also help us onto the housing ladder, we will be needing a mortgage as well. My question is simple, in order to maximise our chances of getting that mortgage, should we clear all debt immediately and in full, or maybe clear the bulk, but leave a small amount on all cards to maintain a healthy credit used/credit taken ratio. I'm concerned that if we clear all the balances to zero in one hit, some of these card companies may reduce the limits or close accounts completely. Any advice? TIA. 

@karma_police With regard to a mortgage and background debt, what matters is -

1. Size of the debt in relation to your income. If it's sizeable, then that may impact the "credit-scoring" that lenders will do when you apply for a mortgage. It may also reduce the amount you can borrow.

2. Size of the monthly outgoings to service the debt. For loans, that will be the monthly payment and for credit cards it'll be an assumed 3-4% of the outstanding balance as a monthly payment.

3. LTV to a certain extent. At high-LTV background debt is likely to have a larger impact.

If the above are an issue, then it may make sense to pay-off/reduce debt. It all depends on the details and specific numbers.

karma_police

K_S said:

karma_police said:

Hi, I put this question in the debt section of the forums, but it was suggested I might be better posting here as well. 

OK, simply put, currently we have some debt, the remnants of a loan, and various credit cards. We are due to be inheriting funds in due course that will not only allow us to clear these debts in full, but also help us onto the housing ladder, we will be needing a mortgage as well. My question is simple, in order to maximise our chances of getting that mortgage, should we clear all debt immediately and in full, or maybe clear the bulk, but leave a small amount on all cards to maintain a healthy credit used/credit taken ratio. I'm concerned that if we clear all the balances to zero in one hit, some of these card companies may reduce the limits or close accounts completely. Any advice? TIA. 

@karma_police With regard to a mortgage and background debt, what matters is -

1. Size of the debt in relation to your income. If it's sizeable, then that may impact the "credit-scoring" that lenders will do when you apply for a mortgage. It may also reduce the amount you can borrow.

2. Size of the monthly outgoings to service the debt. For loans, that will be the monthly payment and for credit cards it'll be an assumed 3-4% of the outstanding balance as a monthly payment.

3. LTV to a certain extent. At high-LTV background debt is likely to have a larger impact.

If the above are an issue, then it may make sense to pay-off/reduce debt. It all depends on the details and specific numbers.

Thank you for that response, we'd certainly be looking to reduce this debt massively, it's not good debt, much of it is costly and at high interest rates. From your reply it would seem to be that it's better to clear this completely and benefit from lower monthly outgoings and having no debt when lenders assess affordability, rather than a perceived benefit of low credit use versus credit availability. 

esubbs

My husband and I have been searching for a property for around a year. In the meantime we marketed and sold our property and moved in with my parents. Nothing suitable has come to market for months and my husband was recently offered a new job, not the best timing but too good an offer to refuse. He'll start his new position on March 7th. Meanwhile I started working on 10th Jan, previously a stay at home parent.
Typically an ideal house has come to market. If we decide to offer after viewing, how long will it be until we can apply for a mortgage? My husband will have no break in employment and employed in the same industry with the same job title but will be in probation period until the beginning of August. I've gone from being unemployed to employed and on probation until April 4th. We have above 40% deposit and borrowing 2.4 times our combined salary, not including bonuses. Both with perfect credit files.
Will any mortgage lenders consider us or will we have to wait?

MummyDN

Hi. Thanks for the thread. Do you have any recent experience with Together Money? Our broker submitted our full mortgage application just over a week ago. Valuation is booked for 10th Feb. Do you know if Together tend to book valuations after they have checked initial affordability? Feeling very anxious as we do not have a lot of options at the moment. Thanks. 

K_S

esubbs said:

My husband and I have been searching for a property for around a year. In the meantime we marketed and sold our property and moved in with my parents. Nothing suitable has come to market for months and my husband was recently offered a new job, not the best timing but too good an offer to refuse. He'll start his new position on March 7th. Meanwhile I started working on 10th Jan, previously a stay at home parent.
Typically an ideal house has come to market. If we decide to offer after viewing, how long will it be until we can apply for a mortgage? My husband will have no break in employment and employed in the same industry with the same job title but will be in probation period until the beginning of August. I've gone from being unemployed to employed and on probation until April 4th. We have above 40% deposit and borrowing 2.4 times our combined salary, not including bonuses. Both with perfect credit files.
Will any mortgage lenders consider us or will we have to wait?

@esubbs Based on the limited info in your post and focusing only on the employment aspect of the case, you should have mainstream options as of today as long as husband has a new employment contract to show. If you can wait till you get your full Feb payslip, that may make things a bit smoother if you need your income to be considered.

If you only need to borrow 2.4 times at 40% LTV, perhaps it might be an option to have both of you on the application but only consider husband's salary.