Own the house but now want a mortgage

Finbri

Hi there, this question's on behalf of my brother who was fortunate to be gifted some money from our parents and his girlfriends parents to purchase a croft up in Shetland - it was a relatively modest purchase price and now after 4 years living in whats quite a small place they want to obtain a mortgage to extend and refurb it.

I've two questions that I'm hoping someone can help with: 

1. What would a bank / building society deem the mortgage to be (what's it called)? As price comparison sites tend to ask whether its a mortgage or remortgage. Technically this is a 1st mortgage but they're not purchasing the building as they already own it. There doesn't seem to be an option on most comparison sites for this - would it be better to go to a mortgage broker? 

2. They've actually started the refurb which involves digging the floor up and basically removing all the wood (due to wood worm) before getting a mortgage offer. Whilst they had a valuation on the building that expires on 28th Dec, I'm concerned that the house is not really habitable now so a bank isn't going to want to mortgage it? The house still technically has a roof, bathroom and kitchen. But at what point does a refurb cross that line where a mortgage isn't viable?
I haven't shared my 2nd question with my brother as am worried he won't handle that, but equally I think he's reliant on the mortgage to fund the rest of the refurb so am a bit concerned. 

Any insights gratefully received!

TheJP

A re-mortgage is when you already have a mortgage and want to transfer lending to a new lender or new product with existing lender. This would be a new mortgage but not a first time buyer mortgage, essentially its the same as a re-mortgage however the rates should be favourable as the LTV will be low.

kingstreet

It's a remortgage of an unencumbered property.

It sounds like there will be issues with mortgageability due to the condition and if there might be agricultural restrictions from the crofting angle.

user1977

As above, if it's an actual croft that brings a legal complication into things and probably restricts the choice of lenders. But I'm a mere lowlander and don't know much beyond you need to find solicitors who understand crofting....hopefully they got some understanding of that from when they bought.

Finbri

TheJP said:

A re-mortgage is when you already have a mortgage and want to transfer lending to a new lender or new product with existing lender. This would be a new mortgage but not a first time buyer mortgage, essentially its the same as a re-mortgage however the rates should be favourable as the LTV will be low.

Ah got it - it is a new mortgage just not a new purchase - makes sense - thank you. (There's no option on the price comparisons for that option so was a little unsure)!

Finbri

user1977 said:

As above, if it's an actual croft that brings a legal complication into things and probably restricts the choice of lenders. But I'm a mere lowlander and don't know much beyond you need to find solicitors who understand crofting....hopefully they got some understanding of that from when they bought.

It was a croft once upon a time but its been residential for 60 years so there's no issue there. But I can see why you raised it. Thank you too for answering!

amnblog

1. It is not habitable, this makes it unmortgagable
2. It is on Shetland which severely reduces the lending options even if it were habitable

Your brother has a problem here if he does not have the cash to sort the property.

Can he get specialised short term borrowing if he can put another property up as security? - Probably. Using just the Shetland property as security? - very unlikely