Advice from those in the know.....

captainhaggis

Greetings, all.

First post here, so be gentle!

I'm in a bit of a tricky situation.

I currently own two propties in Glasgow (both mortgaged). One is valued at about 100k and has equity of perhaps 55k in it. The other is valued at 190k and has a similar amount of equity in it.

Now, last year I put down a deposit on a new build flat in Glasgow that I was going to buy and rent out. It's now nearing completion.

A week or so after reserving that property, the sales agent with the developer (a friend of mine) said that she had another flat available and wondered if I'd like it. She said that "you could reserve it and sell it before completion to make a profit". She said that she'd "sell it no problem". Good deal, I thought.

I reserved the property.

Of course, the market crashes. Now, the flat isn't shifting. I stand to lose my deposit in the flat unless the developer can re-sell it for the same or more as I paid initially.

THE PROBLEM is that the cash I was going to use as a deposit on the first flat (in addition to the deposit paid to the developer) was put in to the second.

Furthermore, I'd made another dodgy investment earlier in the year and my debts are pretty substantial. I'm in payment arrangements with creditors at the moment and repayments to credit cards and a loan amount to about 450.00 at the moment as opposed to the 1000.00 they should normally be.

Now, I know I won't be able to buy and keep the second flat. There's no chance of that.

The first one, though, I'd like to keep and rent out. My problem, though, is finding a lender prepared to give me the money. I need c. £180k or about 90% of the purchase price (although it'll probably be valued at more than the £202k I paid).

Does anyone know any lenders who might entertain my application? Can I use my existing properties and the equity they hold as security for a new mortgage and would I be able to use (with their permission, of course) equity held in my parents' property in the same way?

Could I self cert?

Much obliged, all. Much obliged indeed.

silvercar

Max loan to value on a BTL is 85%, probably a lot less for new build flats, could be as low as 65%.

You could remortgage your existing properties to release equity, provided you have a salary to justify the repayments. With a shot credit rating you will end up paying a high interest rate.

TBH you would be better cutting your losses and forgetting about the flats. In fact if the flat is worth more now, why not sell it to repay some of your debts.

Leon_W

Hate to be the bearer of bad news captain but I can't see it happening.

Your credit rating will probably prevent you from remortgaging what you've already got. You might get a squeak more but the rate would be punitive.

A buy to let mortgage at 90% on a new build flat is simply not available and I feel ANY buy to let mortgage is a non starter for anyone with the slightest hint of poor credit.

As you say though, usually these builders make you exchange contracts with no mortgage in place, so they could get nasty, as generally they can sue you for the difference in price they eventually sell at which could be huge the way the market is at the moment.

Best of luck

beecher

I think you'd be mad to want to keep the first one and would be very suprised if it is worth more than the £202k you paid last year since valuers are tending to be far more conservative now, particularly when it comes to new builds. What sort of rent would you have to charge to cover what you were paying in interest? I'd be looking at the properties worth £100k and £190k and wondering how much they'll be worth in a few months - think I'd be keen to get shot of them all and sort out your debt. Where I live in the southside, flats aren't moving at all and the ones which are are going for more than 10% less than they were last summer.

captainhaggis

All, thanks a million for the advice.

OK. I wonder if this is an option :

I DON'T rent out the first flat. I live in it. Both of my existing properties are rented out so I could afford to live in the new build. I would rather not, though.

I could therefore get (or apply for) a higher LTV% but would doing this - NOT applying for a BTL - help open the door to more lenders for me?

Leon_W

I can see this all getting far too complicated to go into here so just to answer your last point.

Yes, you could apply for a residential mortgage on the new build with a potentially higher LTV but that will be entirely dependent on your income and credit rating. All of the others would have to be on Buy to Let mortgages unless your income is high enough to support two residentials.

Trollfever

http://www.bdl.org.uk/scotland.asp

captainhaggis

Leon_W wrote: »

I can see this all getting far too complicated to go into here so just to answer your last point.

Yes, you could apply for a residential mortgage on the new build with a potentially higher LTV but that will be entirely dependent on your income and credit rating. All of the others would have to be on Buy to Let mortgages unless your income is high enough to support two residentials.

Leon, the other two are on BTL.

Could I self cert, do you think, for the mortgage on the new build?

beecher

captainhaggis wrote: »

Leon, the other two are on BTL.

Could I self cert, do you think, for the mortgage on the new build?

What mortgage would you be looking for, and what's your income? With a shot credit rating, you're probably looking at a low salary multiple. And where's the deposit going to come from (I'm finding it hard to follow this one!) - would you still have to remortgage your BTLs?

Leon_W

I'm sorry. Without knowing what your income is, where it's from, where you live yourself and many more things, I'm not going to be drawn into client specific advice.

This board is for more general generic advice. You need to speak to a broker for specific advice tailored for you.

Hope it works out for you.

captainhaggis

I'd look for a short-term solution as the intention would remain to sell the property.

My salary is in the region of 35k a year and I make a bit of additional cash from my rentals.