What sort of mortgage??

Charlie_P

Hi everyone

I need some advice and suggestions as I am clueless when it comes to money matters

Currently have a 3 year fixed deal with Nationwide at 4.73% with about 20 months to run. Mtg is £85k and house value was £450k at the beginning of the year so say £400k in this market.

Also last year I bought a renovation project in Italy for £100k cash - no debt.

I now want to complete the renovation which will cost around £100k. I also want to sell my house in this country but only in about 14 months time once my son has finished his A levels, clear the mortgage and rent in the UK retaining the property abroad.

I was going to fund the renovation works from the sale of my business (value about £150K), but there has been a change that means that my earnings from the business will increase by about £15k p.a. so it is now worth keeping.

I was thinking that the obvious solution is to increase my UK mortgage but with household income running at about £27k (before the £15k increase above) and no accounts to prove the increase, I do not know the best way to proceed.

Any ideas would be much appreciated

Liz

P.S. Can't mortgage the property abroad until it has basic services that the 100K is needed to instal - Good old Catch 22!!

HelpWhereIcan

One of the better ways to raise the money you need is likely to be through a Further Advance with the Nationwide possibly through their Flexible Advance scheme which will allow you to draw the money down as and when needed rather than all at once. Very competitive at 6.49% for a deal with no early repayment charges which will prevent you paying any when you sell up next year and repay the mortgage.

http://www.nationwide.co.uk/mortgage/flexibleadv/rates.htm

There are slightly lower deals available through their 'standard' range of Further Advance products, but I would suggest that the flexibility and no early repayment charges could be more important than saving a little bit on the interest rate.

Especially as I dare say that even Italian tradesmen don't demand payment in full in advance - at least this way you would know that the money is there and you only pay for it when you use it.

The problem you will have is that the income you can prove will only allow borrowing of around £114,750 with the Nationwide (assuming you have no other credit commitments). The increased income of £42000 would allow up to £178,500, but I am sure it would be possible to raise the remaining £6500 from other sources such as a personal loan if/when you actually need it.

If the additional £15,000 income you mention is due to a contract you have won or something else tangible (not just an expectation of improved trading conditions) and you accountant is willing/able to do a projection showing this income, Nationwide may be able accept the projection and agree the larger loan... especially if the extra income is already being received.

Whether they will accept a projection will depend on a number of things susch as how long you have been trading, whether the additional income is likely to continue (eg is a contract for 3 years rather than just a year) and they are under no obligation to do so. It is worth a try, but Nationwide are not one of the most flexible lenders in terms of lending criteria at times.

What other income do you have from all sources - tax credits, partner's income etc etc?

Another alternative would be to arrange a secured loan. Would save you having to pay early repayment charges with Nationwide and losing a very good rate as you would with a remortgage.

There are secured loan lenders who will allow you to self certify your income and use the £42,000.

However, you will need to watch out for:

High Fees - including excessive broker fees
Settlement figures calculated using rule of 78 and/or early repayment charges.

A third option may be bridging finance, but that can be expensive - especially over the timescales you are talking about. However, you may be able to use it to raise a minimal amount needed to get the property in Italy mortgageable. However you are likely to come up against the income problems for a mortgage on the Italian property so bridging should not be arranged unless you are sure of the exit route and know that it is available.

Have word with a Mortgage Broker who can speak with Nationwide knowing more about you than can be gleaned on an internet forum, but also look at secured loan/bridging options for you.

Ideally use personal reccomendations to pick one or even something like the Yellow pages etc. No harm in speaking to more than one and always make sure to ask the questions Martin suggests in http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1101649966,86816#step2.

If you are going to pay a fee, make sure you know what is payable and when, but also a refund of any commission being paid to the broker by the lender.

Be careful of anyone who approaches you unsolicited and use the services of a face to face adviser unless you are confident enough to deal with someone via post & email.

Hope this helps

Good Luck

Charlie_P

Thank you for the very helpful reply. The extra income is caused by an unexpected reduction in business costs and it is permanent, so it is off to the accountants and try and twist their arm