Want to buy 2nd property for development - mortgage advice?

[C Lee Farquar]

I have done this and unless you have access to other funds you need an actual mortgage offer before bidding. Having anything less than an actual mortgage offer is a very risky strategy especially if you have limited funds.

[vescaegg]

Very risky OP. Bank surveyors (if you can even convince them to lend) can just pick a number out of the air when valuing a property; even more so when its a do-er upper. The last house I bought was on the cusp of being 'habitable' but it had a working gas supply for a freestanding cooker and a sink/toilet/awful tiny shower. Any less and the guy said it wouldnt have gone through.

Id estimate a bank taking 8-10 weeks unless there is a special division for this sort of thing? There may be - Sarnie?

I know you are a builder but have you done your sums like really really thoroughly? Seeing as the bank are buying the house and you are presumably funding the refurb, any extras or overspends are going to have to be met by you.

How much profit is in the place after you are done and paid back the mortgage? If its not a lot (as in £100k+) id get some experience doing this on a house you can do smaller changes to and perhaps live in at the same time. There will be a lot more leeway on mortgages this way too. My first was way than I costed for and im a QS....

I was going to suggest perhaps just trying to secure a large loan against your own house but with no equity I doubt its even possible.
Is it really wise doing this with little to no equity in your own place? Having two houses which can be taken from you with a tits up occurance is worse than having one! If the bank owns all of yours and most of the second, whats the point considering the mahoosive risk?

Not trying to be condescending but it wont be an easy get rich scheme - cant you do something to your own place (extension etc) to increase the value of it and then move upwards in your own house that way building equity as you go? Then one day with enough equity you could possible re-mortgage and get funds to do this then?

Edited by vescaegg on Thursday 21st August 11:22

[Renovation]

Bear in mind if you do up what you live in - NO TAX !

Which is 20-45% in your pocket.

[Wacky Racer]

I realise you are new to this, and enterprise is to be encouraged, but I really think you could be out of your depth here, and it could end in tears....yours.

Maybe different if you owned your own house outright.....(I assume you don't).

Also Mortgage rates are not going to stay low forever....

Good luck anyway, and make sure you look before you leap.

[torqueofthedevil]

Thanks for last few replies t Chet are more constructive. There is still so much negativity and pessimism about tho.



Info admit that pat other people seem to start off buying their first investment with cash; then after that they keep remortgaging. It's just getting 50k or more together is pretty hard! Most shave made cash on a house they bought for about 10k in the 90s and sold for 120!

I need t borrow to ge started. Lesson seems to be - get a property where I can get a mortgage - something habitable and then do that up.

My house can't be extended or really improved in value.

Just out if interest here is the info on the place I liked:

Guide price 50k, planning for house to be split into two 2-bedroom flats. Great village location. Windows fitted. Stairs and floors in. The original terrace already has two flats - same size. Just sold for 80k each. Was going to go halves with a mate - seemed fairly low risk.

Say 30 each to buy. 30 to renovate. 20k profit. Very vague estimates.

[Renovation]

I'd rather people warned me of the pitfalls than encouraged me to do something that could cost me my home.

There are profits to be made but with no equity you really need to be careful and start with your home.

BTW Guide price means nothing and is usually low to attract interest - many auctions start at the guide price and achieve at least 30% more.

[Little Lofty]

I done this many years ago in the days of self cert mortgages and it was as simple as abc. I got back into it about four years ago and it was a struggle to raise the initial capital even though I had 90% equity in my own home and own a couple of buy to let's.I eventually borrowed off my existing lender as I couldn't find anyone else who would let me re-mortgage to buy a second property. Four years down the line and I've tripled the amount I initially borrowed so its well worth doing, the extra now allows me to do more than one property at a time, but the initial capital raising is defiantly the sticking point.

[Rostfritt]

vescaegg said:

Id estimate a bank taking 8-10 weeks unless there is a special division for this sort of thing? There may be - Sarnie?

Edited by vescaegg on Thursday 21st August 11:22

I spoke to Halifax about getting something at auction (didn't in the end) and they said they put a marker on the file to prioritise it. I suppose it is in their interest to get it done on time as otherwise they lose a mortgage sale and have a very unhappy customer.

Bear in mind that the buyers pack contains the local area surveys so you don't have to wait around for those to be done or have something come up in them later on. I sent Halifax a link to the pack from the auction house website and they said they could give it some sort of preliminary check on whether they were likely to lend on it.

[torqueofthedevil]

Rostfritt said:

vescaegg said:

Id estimate a bank taking 8-10 weeks unless there is a special division for this sort of thing? There may be - Sarnie?

Edited by vescaegg on Thursday 21st August 11:22

I spoke to Halifax about getting something at auction (didn't in the end) and they said they put a marker on the file to prioritise it. I suppose it is in their interest to get it done on time as otherwise they lose a mortgage sale and have a very unhappy customer.

Bear in mind that the buyers pack contains the local area surveys so you don't have to wait around for those to be done or have something come up in them later on. I sent Halifax a link to the pack from the auction house website and they said they could give it some sort of preliminary check on whether they were likely to lend on it.

Still be absolutely bricking it after dropping 10% on the night and then just hoping that the bank kept its word. Most experiences of businesses saying they'll prioritise things usually amounts to things taking ages.

[C Lee Farquar]

That's why you get a mortgage offer before you bid. And you're potentially risking more than 10%. If you fail to complete you're in breach of contract, you could be liable for more than 10%.

[torqueofthedevil]

C Lee Farquar said:

That's why you get a mortgage offer before you bid. And you're potentially risking more than 10%. If you fail to complete you're in breach of contract, you could be liable for more than 10%.

Yes but what we are saying is, despite an offer, following the auction the bank can either change its mind, or take too long to complete. You are correct though, the penalties for not completing are pretty severe

[Sarnie]

torqueofthedevil said:

Yes but what we are saying is, despite an offer, following the auction the bank can either change its mind, or take too long to complete. You are correct though, the penalties for not completing are pretty severe

Once you have a mortgage offer, the bank is highly unlikely to change their minds unless your details change. Once you have an offer it's got nothing to do with the bank how long it takes to complete, that will be down to your Solicitor.....

[torqueofthedevil]

Sarnie said:

torqueofthedevil said:

Yes but what we are saying is, despite an offer, following the auction the bank can either change its mind, or take too long to complete. You are correct though, the penalties for not completing are pretty severe

Once you have a mortgage offer, the bank is highly unlikely to change their minds unless your details change. Once you have an offer it's got nothing to do with the bank how long it takes to complete, that will be down to your Solicitor.....

1 - they might not value the house as high as you think it's worth and have subsequently agreed to pay - therefore they won't lend u the money.
2 - no it's the bank that takes time - I have just spoken to few banks and they asked how long did the auction give to complete, when I said 28 days they said, we can't complete in that time, we need a minimum of 6-8 weeks.

[C Lee Farquar]

I give up.

[Sarnie]

C Lee Farquar said:

I give up.

Haha, me too, I tried.....

[Sharted]

So,

You ask for advice and,then,don't like what you hear?

Then you argue about the advice?

Why?

[dave_s13]

If you are young free and single isn't the way to do this as follows:-

1. Sell your existing house
2. Buy somewhere that needs a lot of work but can be lived in (by you).
3. Do house up
4. Sell house.

Rinse and repeat until you've skimmed off enough profit to have a permanent residence and a the means to also have doer-upper on the go at the same time.

[eldar]

dave_s13 said:

If you are young free and single isn't the way to do this as follows:-

1. Sell your existing house
2. Buy somewhere that needs a lot of work but can be lived in (by you).
3. Do house up
4. Sell house.

Rinse and repeat until you've skimmed off enough profit to have a permanent residence and a the means to also have doer-upper on the go at the same time.

And no CGT.

[Rostfritt]

dave_s13 said:

If you are young free and single isn't the way to do this as follows:-

1. Sell your existing house
2. Buy somewhere that needs a lot of work but can be lived in (by you).
3. Do house up
4. Sell house.

Rinse and repeat until you've skimmed off enough profit to have a permanent residence and a the means to also have doer-upper on the go at the same time.

Similar to my plan.

Buy somewhere with 2 bedrooms (anything really) (done)
do it up (current stage)
rent out the spare room to a friend
save up enough for another deposit
buy 2nd place on BTL mortgage
do it up
move in, taking lodger with me
rent out old place
switch mortgages so BTL is on the old, normal (staff discount as I work at a bank) is on the new one
use rental income and lodger income to save enough for a decent place on a mortgage they will lend on while keeping the most profitable one rented out, or both if possible.

[mattdaniels]

Side point but I some people might not be appreciating the difference between an agreement in principle and a mortgage offer.

Agreement in principle = the lender has processed your application forms, done its sums and accepted you and the proposed property as a "good risk" based on the details you provided.

Mortgage offer - the next stage - the lender has carried out its survey/valuation of the property and its other checks, is satisfied, and is committing to an exact amount of cash to give you and awaiting the green light from you.

Sarnie is correct IMHO - if you have a mortgage offer (not just agreement in principle) then the lender has completed their valuation on the specific property in question and the funds are ready for you to access.