Plenty of equity in house but can't remortgage due to Catch 22s

Lone_Northern_Lass

* Bought my house in 2014 for £107K.  No reason to think the value has gone down since then and I've done some significant improvements.

* Outstanding mortgage is under £40K over the next 7 years.

* Moved to live with the boyfriend due to Covid, so my house is now empty. (Council tax dept knows this and I'm sorting empty house insurance.)

* As a keyworker, I'm still comfortably paying my own mortgage but have no plans to move back to the now-empty house.

* Now-empty house's kitchen is extremely old and manky and not in a state whereby the house could be let out (and there are some other bits which would probably need doing in order for the house to be suitable to let out).

* If I could get the house into a suitable state to be let out, then it would be a house for somebody and my income would very comfortably cover the mortgage (my wage covers current mortgage and if the house was rented out there would be rental income coming in on top of my wage).

* My current mortgage lender - Santander - won't lend me more on my current mortgage (I believe because the amounts involved are too small).  (I filled in the application online.  I ticked the option for them to call me to discuss by phone why they won't lend me more, but they have never called me.)

* I talked to L&C about remortgaging.  Hoping to release about £25K of equity and pay the mortgage back over the next 15 years.  Apparently, lenders won't let me remortgage on a buy-to-let mortgage unless / until I've got a tenancy agreement signed by prospective tenants and lenders won't let me remortgage on a residential mortgage because I'm not living in the house and it's empty.

* Aargh!

* Are there any clever options I've missed?  I suspect I'm just going to have to save until I can do the work which would be needed to be able to rent the house out and/or take a non-crippling unsecured loan to cover some of the relevant costs.  This just seems a little crazy to me given that there is the equity there in the house and my wage can cover releasing it regardless of whether or not I do get the house let out eventually (original plan was to be mortgage-free in 7 years time, but I'm only in my late 30s so can well afford to extend the length of my mortgage to 15 or more years).

(* Boyfriend suggests (appropriately) that I should add that he pays the vast majority of our bills / living costs at his house - so affordability tests on the remortgage application should not have been an issue.  (Boyfriend earns a lot more than me.  I know I am very lucky in this regard.  Boyfriend funding new kitchen for the empty house is not, however, a realistic option.))

MFWannabe

Is the only thing that needs doing the kitchen? I know you refer to ‘some other bits’ but what are they? 
If so then you definitely don’t need 25k, especially if you’re going to let the property 
There’s a couple of options: 
1) A lot of kitchen place s do 0% finance 
2) 0% spending credit card 
3) Unsecured loan 
If you’re going to let out the property keep it simple, no point spending a huge amount, it’s not for you 
Other option is to sell the property? 

[Deleted User]

i think you need to speak to an independent broker not a mass brokers, that only deal with simple cases. They can look at your circumstances and advise accordingly 

K_S

@Lone_Northern_Lass Have you fully moved out of the house or are you only living at your boyfriend's temporarily and intend to move back at some point? If the latter you should have options to remortgage with capital raise for home improvements. That's assuming the kitchen, bathroom etc are in a usable state.

If your intention is to let it out, you don't "need" a tenant lined up to get a BTL mortgage. If the house is reasonably habitable, you may be able to get a BTL remortgage against it and raise up to 70-75% LTV, subject to valuer comments and estimated rent.

[Deleted User]

To add to KS comment, there are lenders to who do btl mortgages specifically for light refurbishment propeties so they dont have to be rentable on day 1

Contact a broker

Brough13

Hi All - Just looking for some advice as i want to remortgage to purchase a buy to let. I have 2 years left with Natwest (who have a £3500 early exit fee) but have been offered a secured loan. My residential house is worth £330'000 and I have £180'000 left to pay. I am looking to take out £45'000 to purchase a £150'000 property - is it correct that i need a 25% deposit or are there any company's that offer 10% for a BTL.

I know there will be 3% stamp duty and arrangement fees etc. but I am not sure whether to go the secured loan route of £45'000 over 20yrs @ 5.05% or pay the ear;y fee to Natwest (£3500) and then have a mortgage of £225'000 @ 1.7% approx £1160 / month?

Any advice will be appreciated.

RetSol

* My current mortgage lender - Santander - won't lend me more on my current mortgage (I believe because the amounts involved are too small).  (I filled in the application online.  I ticked the option for them to call me to discuss by phone why they won't lend me more, but they have never called me.)

I suggest that you speak directly to a mortgage advisor at Santander about the options available from them in your current circumstances.  That is the first port of call for you.  You are their customer - don't give up just because "computer says no".  

K_S

Brough13 said:

Hi All - Just looking for some advice as i want to remortgage to purchase a buy to let. I have 2 years left with Natwest (who have a £3500 early exit fee) but have been offered a secured loan. My residential house is worth £330'000 and I have £180'000 left to pay. I am looking to take out £45'000 to purchase a £150'000 property - is it correct that i need a 25% deposit or are there any company's that offer 10% for a BTL.

I know there will be 3% stamp duty and arrangement fees etc. but I am not sure whether to go the secured loan route of £45'000 over 20yrs @ 5.05% or pay the ear;y fee to Natwest (£3500) and then have a mortgage of £225'000 @ 1.7% approx £1160 / month?

Any advice will be appreciated.

@brough13

Option 1 - The cheapest way to do this would be to take out a further advance / additional borrowing from NatWest and use that towards the BTL deposit. I'm not sure if it's an acceptable purpose for Natwest, might want to check with them.

Option 2 - Pay the ERC and remortgage with capital-raise to another lender who is happy with releasing cash for a BTL purchase.

Option 3 - The second charge mortgage you mentioned.

To compare options 2 and 3, you need to weigh up all the costs involved and see which one works out to be cheaper. The second charge option usually comes with a lot of extra fees which you may or may not be aware of at this stage.

And yes, generally speaking you will need at least a 25% deposit for a BTL mortgage.

Brough13

Thank you for your advice.