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

p00hsticks

chilswelluk said:

yksi said:

The banks don't know you, they can't trust complete strangers, and they are looking for the evidence before they hand you their proverbial minibus keys. You think it's silly, they think, "Pfft I won't lend my very expensive large vehicle to a guy who hasn't shown me that he knows how to drive a small hatchback."

My grandparents and parents never had a personal loan / credit card in their life and all got mortgages.  In the history of banking, it's a relatively recent hoop that people have to jump through.

That's because it's also relatively recent that people shop around a vast number of institutions for a mortgage.

In the 'olden days' you would have been saving your deposit for many years with your local building society, and it's them that you would then go to (in person, to the manager) to ask for your mortgage - so the mortgage company already had a longstanding  relationship with the customer even before they lent them any money.

chilswelluk

se2020 said:

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. 

You never know, COVID may end up tanking the market.  But then I suppose even if the prices do fall, you may then find that nobody is lending.  So it kind of puts you in a catch 22 situation.  If you are struggling to save, have you considered renting a room in a house?  I know it's not ideal, but I am seriously considering it.  

Brock_and_Roll

Covid  directly or indirectly will bring many opportunities to individuals and companies that are cash rich, or have access to cheap funds.  
In the corporate world I am seeing a "flight to quality" - the best credits are still borrowing at close to the lowest ever levels, whereas weaker clients are seeing rates rise significantly - you don't need to be a genius to see how that is going to pan out in the dog eat dog business world. 

Personally, I have been building up my own pot of cash, not only as a back up, but also just in case a distressed business or property opportunity come along.

I wonder if the OP knows any wealthyish potential private investors? If a good friend gave me such an investment opportunity with a suitable return, I would certainly consider it.

Petriix

se2020 said:

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. 

There is only an Early Repayment Charge during any fixed period. You could happily take a 25 year mortgage with a 2 year fix and pay it all off after 2 years; that's effectively what thousands of people do when they remortgage to a new lender.

chilswelluk

Brock_and_Roll said:

I wonder if the OP knows any wealthyish potential private investors? If a good friend gave me such an investment opportunity with a suitable return, I would certainly consider it.

Actually my parents are pretty comfortable.  They have over 800k in savings and the house next door to them just sold for 1.3 million.  But there is not a chance they would lend me money.  My brother asked them years ago if he could borrow 20k to buy our his mooring on a house boat.  He has a respectable job working as a physics lecturer at a red brick university, however they refused to lend him anything.  They feel strongly that people should stand on their own feet, since their parents never left them anything until they died.  My brother got a personal loan in the end, but has never spoken to my parents since.  I respect their position, but it can be frustrating. 

Brock_and_Roll

chilswelluk said:

Brock_and_Roll said:

I wonder if the OP knows any wealthyish potential private investors? If a good friend gave me such an investment opportunity with a suitable return, I would certainly consider it.

Actually my parents are pretty comfortable.  They have over 800k in savings and the house next door to them just sold for 1.3 million.  But there is not a chance they would lend me money.  My brother asked them years ago if he could borrow 20k to buy our his mooring on a house boat.  He has a respectable job working as a physics lecturer at a red brick university, however they refused to lend him anything.  They feel strongly that people should stand on their own feet, since their parents never left them anything until they died.  My brother got a personal loan in the end, but has never spoken to my parents since.  I respect their position, but it can be frustrating. 

If your parents are financially savvy then they might look at things differently if it was presented as a genuine investment opportunity rather than "help" - after all they are probably only getting a few % on their savings, so a return of say 20% after 5 years might float their boat if they have legal security etc to protect their investment.

theoretica

You are on a mortgage board so getting mainly mortgage advice - and it is clear this isn't going to happen with any sort of standard mortgage.  I think it would be worth your while to find a good and versatile loan broker to talk over options for a secured or unsecured loan and what you might need to get something non-standard.  I suspect, like mortgages, you will at the very least need some months of payslips to prove income, not a job that is shortly to start.

Is planning permission OK for the site?  I believe uninhabitable ruins eventually lose residential status and need planning permission for change of use back to residential. 

Thrugelmir

Anamox said:

yksi said:

chilswelluk said: It seems all a little bit silly.  I really have no need for a credit card, yet I have to jump through hoops and start using one to have a chance of getting a mortgage.  I know many people use credit cards, but I have never really seen the practical benefit for myself.  I have always budgeted my money accordingly.  But if I must have a credit card, I will get one.  I will look for a card with cashback etc, so at least I get something out of it, however it's still an inconvenience remembering to buy things on it etc.

Would you hand your personal minibus keys to me without knowing anything, or would you check for a license, have a look at my car for scrapes and dents, go for a drive with me to make sure I'm not doing 50 past schools, make sure you know who I am, get a proof of my address etc?

The banks don't know you, they can't trust complete strangers, and they are looking for the evidence before they hand you their proverbial minibus keys. You think it's silly, they think, "Pfft I won't lend my very expensive large vehicle to a guy who hasn't shown me that he knows how to drive a small hatchback."

What OP says is true though, it is essentially quite silly. However, I know there are many ways to look at it.

One way to look at it is:
- Person A: earns £50k in a solid job they've had for 10 years, has never used any credit facility, has years of bank statements showing they can live on the money they earn comfortably and do not go crazy with it. Cannot get a mortgage as they're untrustworthy.
-Person B: earns between £30k-40k in the last 10 years over 5 jobs, uses credit cards frequently to purchase things they can't afford but pays it off eventually when their annual bonus comes in, has purchased expensive cars on finance and has even bought things like iPads on finance and hasn't ever missed a payment. Gets a mortgage because they're "trustworthy". 

Person A will ahead in the mortgage queue. Providing that they are on the electoral roll. Use of credit is not a prerequisite to obtaining a mortgage. Simply managing ones personal finances well is sufficient. Borrowing only as necessary. 

se2020

Planning permissions for residential use can lapse once the property is considered abandoned, or has been used for something other than residential. 
A hole in the roof and a tree growing inside is going to look abandoned to pretty much any surveyor the bank send out.
Even some (most?) of the self-build mortgages will require planning permission to be in place before lending and if it looks abandoned they will want a certificate of lawfull use
 That will cost you £500 or so and also runs the risk that if you pay for it and get it you may inadvertently increase the value of the property before you purchase it and the seller may ask for more money or find it easier to sell to somebody else.

Regarding other forms of finance,  most brokers I have spoken to have mentioned development finance. None of them have been able to secure it for me.
The providers I have found myself either have very high interest rates, minimum loans of £500k, want me to be a nchb approved builder, have a successful history of projects like this, or have 50% of the total costs (buy & rebuild) up front. Or a combination of the above.

Private finance is available although it's a lot easier to source if you know somebody personally who can provide it.  I have looked into this twice, interest rates can be reasonable (one guy even offered to beat the beet bank rate I could get) . The terms of lending can be anything though and I was not prepared to sign myself or my family up to either rof the ones I was offered. It would have been fine if I was making a business investment but not for building my lifetime family home from.

Private mortgages are another option, they tend to be more like a regular mortgage just with an individual rather than a bank. I have only ever been offered one by a landlord I was renting from and that was for slightly dubious reasons. You may have more luck but I do not know where you would look for a lender? I do know several people who have them but they are all provided by people who already owned the house in question so it's not like they actually had to have the money to lend in the first place.

One place to start with the private mortgages might be the seller of the house in question. If it is an inheritance sale or something they may not need the money all in one go and you might get some luck if you offer to pay them £30k now and another £10k a year for the next 10 years. Or they might just be happier to sell it for £80k now to a cash buyer and take what they can get quickly!

Yet another option is you approach the seller, offer them some random amount of cash to take it off the market for a while then you go in there and fix the roof/remove the tree/add a really basic sink/toilet and get the property into a mortgagable condition before sorting out the rest of the finance to buy it.
Big financial risk for you and unless it's been on the market for a year with no interest the seller is unlikely to go for it.
Around my way the places I keep dreaming about sell in weeks rather than months.
Probably a third of them get put back on rightmove after a few months, presumably because the buyers can't get finance either. The third time they get listed is either as an auction or marked as "cash buyers only "

se2020

Rent is not exactly dead money either.
A: it provides you somewhere to live that is not a river boat or a caravan. (Or a room in a house full of 20yr olds)
B: It stops you having to pay interest on a mortgage. 

If you can rent a room for £70p/w that's £303 a month.
The interest on a £120k self-build mortgage would cost about the same as that so it would not make any difference if you paid the interest to allow you to build equity in the property or just rented the room and saved the equivalent repayments aside.

I am in the position hat the rent I pay is actually cheaper than the mortgage interest would be for an equivalent property.
This has the advantage of allowing me to save more at the same time as living in a house that is suitable for my lifestyle and business activities.  
I will point out that I still seem to be a long way from purchasing the sort of place that I am renting but that's possibly due to me being over-ambitious on what I can achieve coupled with my income relative to house prices in my area.