Trying to get a loan

[Bumblebee7]

Hello,
Just wanted to ask for some collective wisdom. Have recently purchased a house that requires a lot of work to make it habitable (currently well under way) and will require £15-25k in loans to complete the refurbishment. I own two BTL's and have always in the past bought a property, taken out loans to do them up and over a few years paid the loans off. Over the last 5 years or so I have taken out 4 loans, 3 of which at 3.3% and 1 at 1.9% APR. All paid off in full, without ever missing a payment. At present I have one outstanding loan at just over £1k due to be repaid in the next 3 months.

I have just applied for a few loans with a number of different providers including my usual bank and the best rate I have had back is 18.9%

To say I was surprised would be an understatement, my credit score is good (Experian showing 906/999). I've never missed a payment, lived at the same address for nearly 2 decades, same employer and a decent salary for over 5 years. I just don't get it. Is anyone else experiencing similar at the moment?

Any other ideas what could be causing it or are banks just really, really cautious lending out money at the moment.

Thanks

[Welshbeef]

https://www.theguardian.com/money/2020/oct/15/uk-b...

They are de risking.

Maybe the previous debt is showing on your credit file whereas in a months time it will be cleared.

Borrowing £ is going to get harder and likely means your way of doing things may have to adapt.
Or speak with Sarnie on PH.

[Bumblebee7]

Thanks, so looks like the general appetite for lending is waning somewhat.

[BoRED S2upid]

So if banks don’t lend and don’t give you any incentive to save what is the point in them?

[Jamescrs]

With the recent news reports about the BofE approaching banks and asking the about how ready they are for negative interest rates I wonder if this will have an effect on the banks willingness to lend money?

[Welshbeef]

BoRED S2upid said:

So if banks don’t lend and don’t give you any incentive to save what is the point in them?

With such low rates they are not making any money plus with all the 2008 fines still going and now the bad debt provisions mounting they are taking less and less appetite for lending

[anonymous-user]

The logical answer is to mortgage one of the BTLs.

[Bumblebee7]

Apologies if OP not clear, I have bought properties in bad condition, with a mortgage and then taken out further loans to refurbish them, subsequently paying those loans off but retaining the original mortgage.

Current house isn't mortgageable and was a cash purchase, I'm in the awkward position where I need the loans to finish the house so that I can get a mortgage on it. I should in theory be able to pay the loans off once I have a mortgage so worst case scenario I may just take out a few loans at the ridiculously high interest rates mentioned as I should only be paying the interest for 3-5 months. House is a conversion so needs building regs approval so a quick botch job won't cut it on this one.

[Welshbeef]

Bumblebee7 said:

Apologies if OP not clear, I have bought properties in bad condition, with a mortgage and then taken out further loans to refurbish them, subsequently paying those loans off but retaining the original mortgage.

Current house isn't mortgageable and was a cash purchase, I'm in the awkward position where I need the loans to finish the house so that I can get a mortgage on it. I should in theory be able to pay the loans off once I have a mortgage so worst case scenario I may just take out a few loans at the ridiculously high interest rates mentioned as I should only be paying the interest for 3-5 months. House is a conversion so needs building regs approval so a quick botch job won't cut it on this one.

This is a problem - I had this - even though you have the cash to clear the loans once the mortgage is done the problem is the bank doesn’t trust the fact you’d pay off the loans instead they take affordability into account. In my situation I should have got mortgage first then paid out the works from that - I thought I was being more efficient doing it credit card / short term loan etc.

Obvs the maths made total sense - one bit of feedback was clear the loads first , I said I don’t have the cash flow to do so this is why I’m getting a mortgage which is 2%. They said you are taking out debt at 2% but paying off debt at 0%. Yes I am as that 0% is turning into 18.9% or if I can find another deal they have 2.99% upfront fees.
Essentially they refused / came up with a mortgage offering of a fraction of what was needed.

So to get around it I asked Dad can I short term borrow this cash he agreed I cleared them then the mortgage company offered massively more than I ever required - I took it all of course and into higher interest saving /other investment + cleared my dues with Dad.

Total PITA and for plenty of months I was hitting credit limits which really is no fun / then balancing which you pay first.

Speak to Sarnie.

[red_slr]

Bumblebee7 said:

I have just applied for a few loans with a number of different providers including my usual bank and the best rate I have had back is 18.9%

Thats your problem, applying for several loans all at ocne, IMHO.

[33q]

Money transfers on credit cards may be an option for you.

In the past I've had 18 months for 2.4% fee....not so good at the moment but MBNA offered me 4.0% a few days ago.

[JulianPH]

One word: Sarnie.

[Simpo Two]

JulianPH said:

One word: Sarnie.

This is no time to discuss lunch Julian, the man needs a loan!

[JulianPH]

Simpo Two said:

JulianPH said:

One word: Sarnie.

This is no time to discuss lunch Julian, the man needs a loan!

[Bumblebee7]

Had a representative from my bank call me today to advise that following review the bank has decided not to alter the interest rate offered. She sounded as bewildered as I am and with her recommendation I have escalated it to a formal complaint which the bank will have to respond to.

The general gist being that if my risk profile hasn't changed them why is the interest rate being offered to me 5x worse than previously. And if my risk profile has changed, what is the cause of it so I can take remedial action.

[Sheepshanks]

red_slr said:

Bumblebee7 said:

I have just applied for a few loans with a number of different providers including my usual bank and the best rate I have had back is 18.9%

Thats your problem, applying for several loans all at ocne, IMHO.

That was my first thought too.


OT, and maybe it's just me, but I'm bemused that someone with a couple of BTLs and the ability to buy a house cash would run things so tight they can't put their hands on £15K, or even do the refurb in stages as money become available.

[Welshbeef]

Bumblebee7 said:

Had a representative from my bank call me today to advise that following review the bank has decided not to alter the interest rate offered. She sounded as bewildered as I am and with her recommendation I have escalated it to a formal complaint which the bank will have to respond to.

The general gist being that if my risk profile hasn't changed them why is the interest rate being offered to me 5x worse than previously. And if my risk profile has changed, what is the cause of it so I can take remedial action.

How much £ do you need to get them finished?

I feel for you as I remember with vivid awareness of a time I was very close to the edge. Note I didn’t tell the wife and I think I thought I’d find answers or the ability to forget about it for a bit with the booze. Neither would I recommend anyone tries as it puts so much pressure on you. Tell your mrs tell your parents - there is no shame

[Bumblebee7]

Sheepshanks said:

red_slr said:

Bumblebee7 said:

I have just applied for a few loans with a number of different providers including my usual bank and the best rate I have had back is 18.9%

Thats your problem, applying for several loans all at ocne, IMHO.

That was my first thought too.


OT, and maybe it's just me, but I'm bemused that someone with a couple of BTLs and the ability to buy a house cash would run things so tight they can't put their hands on £15K, or even do the refurb in stages as money become available.

Started with my usual bank, expecting the usual 3.3% and was shocked when I got such an appalling rate, hence trying a few other lenders to see if it was a glitch in my bank. It wasn't.

As to running the budget tight, yes I've always massively overstretched myself when buying property and relied on loans to bridge the gap when my own funds ran out and it's always been fine. My wife and I (both 29) will by the end of this year own a fully renovated, detached 4 bed house with outbuildings in our dream part of Cornwall with no immediate neighbours and just a few mins walk to the sea. Our incomes are certainly respectable, but not high and certainly not in keeping with the income needed to buy a house at this level.

So yes, we've overstretched and now need loans to finish the renovation. I work in property refurbishments so generally know what to budget for and what to expect. The house was a commenced project by the previous owner and unfortunately the more I took apart the more I had to redo. Unfortunately the result of this has been £20k of unexpected expenses to get the house to the standard we thought it was at when we bought it. We've also upped the spec (as we hope this will be our forever home) so installed items like an oak staircase, top range under floor heating, ceiling speakers, POE CCTV etc etc. We will end up being approx £25k over our initial budget, only £5k of which is really over budget and £20k of that fixing the mistakes of the previous owner.

We could, as one poster suggested simply take our time and finish the project over the next 12 months. To me this is a bad idea on two fronts, firstly why wait to enjoy it when we can enjoy it sooner by borrowing to get it done sooner. Secondly, I have genuine concern over the UK economy and job security in general so would like to take a mortgage out on the house as soon as possible. This means borrowing money short term to get the house finished.

In conclusion I'm still none the wiser why I've been refused a loan at a competitive interest rate, and if I need to I will simply take what's available to me and look to pay it off as soon as we're able to get a mortgage on the house.

[Sheepshanks]

Thanks for that - I'm genuinely filled with a mix of admiration and terror!

As you say, if you only need the money for a few months then the interest rate isn't so crucial.

[Bumblebee7]

Welshbeef said:

How much £ do you need to get them finished?

I feel for you as I remember with vivid awareness of a time I was very close to the edge. Note I didn’t tell the wife and I think I thought I’d find answers or the ability to forget about it for a bit with the booze. Neither would I recommend anyone tries as it puts so much pressure on you. Tell your mrs tell your parents - there is no shame

I'm not especially stressed about the whole thing, more perplexed/pissed off than anything else. My wife is well aware, we've been together since we were teenagers so all of our life plans, investments etc are mutual. At present I have just over £1k in loans hence we were expecting I would take out the balance as she has this year taken out over £20k in loans to put towards the build. All of this taken out at 3.3% over 5 years.

Unfortunately we can't rely on our parents as they're not wealthy so other than sympathy they won't be of much use, and to make matters worse both sets of our parents were made redundant due to CV19 as they worked in skilled, but highly affected industries. Thankfully they'll all be ok as all houses nearly paid off and they all have over a year's salary in savings. My mum in particular can live exceptionally frugally when she needs to and is currently enjoying and making use of her new found free time.

If s*it really does hit the fan though I do have a family friend who can loan us the funds required. The question has been asked and specifics agreed but I'd rather not use that option unless there's no alternative.