Getting a mortgage for uninhabitable property with no work or credit history?

se2020

If you can rent a room for £70 a week and keep your living expenses ti the same sort of level you could potentially save up £30k a year.
In 2-1/2 to 3yrs time you would be able to purchase with cash and have the money to buy the caravan so you could move straight onto site.
That would save you another £70 a week with no mortgage to pay either.
Chuck £30k a year towards the build, wont go far so will take a while but would be enough for you to have some major works done every year (ie new roof for £20k) plus leave you a few £ for materials to carry on with the smaller works you can do your self.

se2020

chilswelluk said:

kingstreet said:

 If you were able to continue once your 30% deposit is "invested" in purchasing the property, where are the funds going to come from for the renovation?

The funds would come from my salary.  I would live in a caravan on site and I would not be in a rush to complete the renovation - it may well take more than 10 years.   It would be a case of throwing money and time at it, whenever I can.  I don't want to be under any pressure to have to complete within X years.

Its not going to happen with a mortgage lender.
They want to see that the asset the loan is secured on is going to go up in value.
If you do not have the funds up front to do the work, or they can not lend you the money to do the work then how do they know that the work will ever get done?
Meaning the "house" could carry on falling apart and drop in value or even be condemned by the council. 

Also, self-build mortgages have much higher interest rates. Normally you would complete the work as quick as possible then remortgage with a standard product.
If you take 10yrs+ to do the build the interest on the £70k might well cost you more than borrowing £200k for a livable house in the first place.

I don't meen to sound negitive but I have been trying to do what you want to do for the last 10yrs. If I had just bought a standard town house 10yrs ago and overpaid the mortgage by 10% a year I would probably be in a position to do it now. As it is I am still not close to finding a lender although if I could find a property for £100k in my area it might be possible...

chilswelluk

se2020 said:

If you take 10yrs+ to do the build the interest on the £70k might well cost you more than borrowing £200k for a livable house in the first place.

I certainly would not take 10yrs+ to pay off the 70k mortgage.  My plan would be to live on site in a caravan and not start any major building work until I had paid the 70k mortgage in full.  living on site in a caravan and earing 38k, I should be able to clear 70k quite quickly.  I would then be mortgage free and could start using my salary to fund the renovation.  

[Deleted User]

Why dont you just apply and see what happens with the mortgage company

Be sure to come back and tell us their decision 

se2020

Densol said:

Why dont you just apply and see what happens with the mortgage company

Be sure to come back and tell us their decision 

Apply for what?
I have not even been able to find a lender that offers a product to apply for, let alone meet the requirements of it.

chilswelluk

Densol said:

Why dont you just apply and see what happens with the mortgage company

It's something I need to do more research on and think very carefully about how I approach any application.  As it stands, I think I have very little chance.  It's disappointing, but I am realistic about the outcome.

se2020

chilswelluk said:

se2020 said:

If you take 10yrs+ to do the build the interest on the £70k might well cost you more than borrowing £200k for a livable house in the first place.

I certainly would not take 10yrs+ to pay off the 70k mortgage.  My plan would be to live on site in a caravan and not start any major building work until I had paid the 70k mortgage in full.  living on site in a caravan and earing 38k, I should be able to clear 70k quite quickly.  I would then be mortgage free and could start using my salary to fund the renovation.  

There is a higher cost to this as well,
The maximum overpayment on most mortgages is 10% each year, so it's either going to take you 9-10 years to pay it off or you will pay penalties for overpaying. 

You would need to work the maths out but I expect it would be a lot cheaper to have the £70k over 25yrs, pay the smallest monthly mortgage payment you can and put the rest of the money into the house so you can swap to a normal mortgage as soon as possible and then aim to pay that off over the 10yrs after the house is finished.
In reality you may even keep that mortgage running and use the income to upgrade the bathroom/kitchen/do an extension as it's pretty cheap to borrow on a normal mortgage. 

se2020

chilswelluk said:

Densol said:

Why dont you just apply and see what happens with the mortgage company

It's something I need to do more research on and think very carefully about how I approach any application.  As it stands, I think I have very little chance.  It's disappointing, but I am realistic about the outcome.

How you approach it is not the issue 
You (and the property) either comply with the lenders terms or you do not.
Even the small building societies that will have a face-to-face interview with you are just manually assessing if you comply rather than using a computer.
You could trawl around lenders websites, find the t&c's and see if you can find one that is suitable.  Please let me know if you do!!

Otherwise the option is to save like mad and build up credit history. If you start now then in 18months you might be able to save £40k and borrow another £30k on an unsecured loan.

I have not been able to save that much over the last 10yrs, basically what I have saved has covered the extra deposit needed due to rising house prices so although I have more in the bank I am in pretty much the same situation as I was 10yrs ago.
Last place I looked at that needed loads of work (in my area) would need to drop in price by 32% for me to get a self-build mortgage on it. 

Cscott139

chilswelluk said:

ACG said:

The only way you would get this property is with a bridging loan. They lend against the asset value, a residential mortgage lenders against a home - which this would not be (until the work is complete). 

A bridging loan is for a maximum of 12 months and is generally around 12% interest for the year. 

Your not going to get this with everything else to contend with. 

My first home was a renovation project but by renovation I mean it needed a new kitchen and bathroom, GCH and decorating. You could live in it, but it was a throwback to 70s and reliant on storage heaters. You can get renovation project properties but you need to be able to live in it really even if you plan on living in a caravan on site so to speak. 

That's a real shame, as it's the only type of property I am interested in.  I want somewhere detached with a bit of land and any property of this type that simply needs some light renovation etc is well outside my price range.  It sounds like my only option is to buckle down and save for 10 years or so and become a cash buyer.  I can move into a cheap room rental in a shared house and see how much money I can put away.  It just means the years will tick by before I can buy something.  Not ideal when you are middle aged.

Or you could use your deposit and new job to buy a cheaper house for now and the review the situation in a few years. If you rent its dead money but if you buy at least you are repaying your mortgage and increasing your equity (provided house prices dont fall) and therefore will have more money to put down against a project in the future.

chilswelluk

Cscott139 said:

Or you could use your deposit and new job to buy a cheaper house for now and the review the situation in a few years. If you rent its dead money but if you buy at least you are repaying your mortgage and increasing your equity (provided house prices dont fall) and therefore will have more money to put down against a project in the future.

There is no way I am doing this and besides buying anything "cheaper" will likely result in me having to borrow more than the 70k I want to borrow for a derelict property.  Rent is only dead money if property prices continue to rise, but if the whole market tanks then I could be stuck in negative equity for years.  My uncle got burnt very badly on property in the 1980s and it took him years to financially recover.  We are in very uncertain times with COVID and I would not buy anything unless I was prepared for it to be a forever home.  The thought of being stuck in a house that I never wanted to buy for years on end, gives me nightmares just thinking about it.

If I can't get a mortgage, I will rent a cheap room in a house and save like mad, aiming to be a cash buyer at some point.  I can't say I am too keen living in a cheap house share with people in their early 20s, but it may be my only viable option.