Remortgaging to fund business

[V8mate]

Has there been a change to mortgage lending rules which prohibits taking equity out of your home to do whatever you fancy with? e.g. using it to start/support a business.

Just about every lender, including mine, specifically exclude this, and limit additional borrowing almost exclusively to home improvements, for which they want to see the quotes up front and inspect the works to make sure they happened.

[FWIW]

You seem to have answered your own question and I can't add anything to that, but you might be able to use the house as security on a loan or overdraft?
Have you thought about selling to rent?

[V8mate]

I can see why you feel I've answered my own question, but I was wondering whether the situation had come about due to changes in regulations or simply because building societies et al didn't want to fund the business sector in times of such long-term low rates?

I'm only looking for £100k; seems rash to flog my home...

[Sarnie]

V8mate said:

I can see why you feel I've answered my own question, but I was wondering whether the situation had come about due to changes in regulations or simply because building societies et al didn't want to fund the business sector in times of such long-term low rates?

I'm only looking for £100k; seems rash to flog my home...

Depending on the circumstances, it's possible, but most lenders will auto-decline as soon as you as it's for business purposes........that has always been the case for as long as I can remember, so has no correlation to the current rates being low.........

[Whistle]

I approached my bank and tried to remortgage my house so I could buy an industrial unit for my business.

They would not lend my the money as it was for my business, I then said I was building an extension and then they where quite happy to lend me the money.

Although they took that long messing around I ended up borrowing the money off my parents.

[V8mate]

Sarnie said:

Depending on the circumstances, it's possible, but most lenders will auto-decline as soon as you as it's for business purposes........that has always been the case for as long as I can remember, so has no correlation to the current rates being low.........

I have no doubt that you're right, but it has also been a relatively easy route to supporting small businesses which people have looked to.

Lenders are now, clearly, doing their best to prevent people increasing mortgage debt for pretty much any reason other than home improvements.

[Sarnie]

V8mate said:

I have no doubt that you're right, but it has also been a relatively easy route to supporting small businesses which people have looked to.

Lenders are now, clearly, doing their best to prevent people increasing mortgage debt for pretty much any reason other than home improvements.

They aren't...............it's not changed.......lending for business purposes has always been a "no no".......

But some will do it, it just depends on the circumstances........Eg if the money was to start up a business that would be replacing your current income, that would be a no from the start......

[V8mate]

Sarnie said:

V8mate said:

I have no doubt that you're right, but it has also been a relatively easy route to supporting small businesses which people have looked to.

Lenders are now, clearly, doing their best to prevent people increasing mortgage debt for pretty much any reason other than home improvements.

They aren't...............it's not changed.......lending for business purposes has always been a "no no".......

But some will do it, it just depends on the circumstances........Eg if the money was to start up a business that would be replacing your current income, that would be a no from the start......

Sorry - I'm clearly not being clear - in the past it was quite easy to take additional borrowing offering no reason whatsoever or a lame reason which you had no intention of delivering. And then blow the cash on speedboats, casinos, or... putting into a business. No-one much cared.

Look back through 'I need dosh for business' threads on here, and 're-mortgage your house' is always amongst the default responses. My point is that lenders are now taking significant steps to stop people liquidating their homes for coke, hookers and/or business purposes.

[Sarnie]

V8mate said:

Sorry - I'm clearly not being clear - in the past it was quite easy to take additional borrowing offering no reason whatsoever or a lame reason which you had no intention of delivering. And then blow the cash on speedboats, casinos, or... putting into a business. No-one much cared.

Look back through 'I need dosh for business' threads on here, and 're-mortgage your house' is always amongst the default responses. My point is that lenders are now taking significant steps to stop people liquidating their homes for coke, hookers and/or business purposes.

So, the issue is that lenders are now carrying out due diligence to reduce mortgage fraud?

[V8mate]

Sarnie said:

So, the issue is that lenders are now carrying out due diligence to reduce mortgage fraud?

Liquidating the value of your house isn't, in itself, fraud. They're just restricting it to one specific purpose.

Yet in another area of the market, they are preying on old people to do exactly that: liquidate and piss the money up the wall.

[Sarnie]

V8mate said:

They're just restricting it to one specific purpose..

No they aren't.

I've done mortgages with capital raising for Ferrari's......property abroad.......investments......speed boats......to pay private school fees...........they will lend for most reasons.........but on the "no no" list is lending for business purposes......along with paying gambling debts and tax bills..............

[drainbrain]

Back in reality (a place far North of PH) many a lender makes business borrowers sign pledges involving their personal wealth (including properties) which amounts to the same thing. Think PG. Pretty common really.

[DonkeyApple]

V8mate said:

Sarnie said:

So, the issue is that lenders are now carrying out due diligence to reduce mortgage fraud?

Liquidating the value of your house isn't, in itself, fraud. They're just restricting it to one specific purpose.

Yet in another area of the market, they are preying on old people to do exactly that: liquidate and piss the money up the wall.

It's slightly different. For equity release the schemes ensure that they can take the property at any time, dump it at auction and get enough back to clear the debt.

In your situation they want you to invest any increase in loan into increasing the value of the property to ensure that there is always enough equity to take it from you and dump it at auction to clear any debts.

They never liked to lend for business investment purposes and the vast majority of U.K. people will set up businesses to sell goods for half of what they buy them for so as a lender you know that in 90% of cases that cash is just going in the bin.

And as you say the days of accommodating the Jetski People via mortgage lending is currently on hold.

But this is why 'specialist lending' has grown. It's financed by the main lenders but it keeps the client off their books and ring fenced in a turd business and has good returns. It's like Wonga for people who are Wonga people but don't want to admit it.

Ultimately it's better to just put a proper business plan together and go get a business loan/overdraft. There are plenty out there but lenders expect to see a business plan that isn't about selling £2 items for £1.

[NickCQ]

DonkeyApple said:

Ultimately it's better to just put a proper business plan together and go get a business loan/overdraft. There are plenty out there but lenders expect to see a business plan that isn't about selling £2 items for £1.

Or just have an offset mortgage from the get-go, to keep the flexibility to re-draw?

[drainbrain]

DonkeyApple said:

Ultimately it's better to just put a proper business plan together and go get a business loan/overdraft. There are plenty out there but lenders expect to see a business plan that isn't about selling £2 items for £1.

Eh??

Take it you hadn't heard about the dreaded Contagious 2008 Banking Eating Disorder.....

"yes, nice plan, and as you say certain to succeed, but I'm afraid we haven't got any APPETITE for that sector just now....."

Man, I'm a loan junkie and haven't even applied for one since an "appetite refusal" in 2009.

( have heard the challengers are 'open for business' , right enough).

[Efbe]

drainbrain said:

DonkeyApple said:

Ultimately it's better to just put a proper business plan together and go get a business loan/overdraft. There are plenty out there but lenders expect to see a business plan that isn't about selling £2 items for £1.

Eh??

Take it you hadn't heard about the dreaded Contagious 2008 Banking Eating Disorder.....

"yes, nice plan, and as you say certain to succeed, but I'm afraid we haven't got any APPETITE for that sector just now....."

Man, I'm a loan junkie and haven't even applied for one since an "appetite refusal" in 2009.

( have heard the challengers are 'open for business' , right enough).

Actually I applied two years ago and grants/loans were being thrown at me. The banks are trying their hardest to show everyone how much they are helping out now, and to be quite honest its turned back to pre-recession days to get a loan/credit card/mortgage.

[drainbrain]

Efbe said:

Actually I applied two years ago and grants/loans were being thrown at me. The banks are trying their hardest to show everyone how much they are helping out now, and to be quite honest its turned back to pre-recession days to get a loan/credit card/mortgage.

Yes you're probably right. That old historic refusal turned me from loan junkie into loan averse. Which also feels good (particularly with recent silly btl loan interest tax changes in mind) but then so did using the OPM system of partnership with lender.

Glad to hear the taps are open again.

[PistonBroker]

We spoke with our mortgage provider about extending the mortgage a few months back - we've got a £120k mortgage on a house that's worth £275k at its lowest estimate. They declined.

We then came across the opportunity to buy another business and, bearing in mind the conversation we'd already had with our mortgage provider, figured the only way to release the cash to do it would be to sell up and go into rented.

I then happened to bump into a Finance Broker I know through networking and mentioned it in passing. He said he could think of a number of commercial mortgage providers who'd happily lend us the money and take a second charge on our house.

So is that the answer OP?

[drainbrain]

PistonBroker said:

We spoke with our mortgage provider about extending the mortgage a few months back - we've got a £120k mortgage on a house that's worth £275k at its lowest estimate. They declined.

We then came across the opportunity to buy another business and, bearing in mind the conversation we'd already had with our mortgage provider, figured the only way to release the cash to do it would be to sell up and go into rented.

I then happened to bump into a Finance Broker I know through networking and mentioned it in passing. He said he could think of a number of commercial mortgage providers who'd happily lend us the money and take a second charge on our house.

So is that the answer OP?

Secured second charge lending certainly USED to be at sub-prime rates some of which can be pretty eye-watering compared with resi remortgages. But I'm told that they are currently readily available although, of course, only on property with an existing first charge.

[Efbe]

drainbrain said:

Efbe said:

Actually I applied two years ago and grants/loans were being thrown at me. The banks are trying their hardest to show everyone how much they are helping out now, and to be quite honest its turned back to pre-recession days to get a loan/credit card/mortgage.

Yes you're probably right. That old historic refusal turned me from loan junkie into loan averse. Which also feels good (particularly with recent silly btl loan interest tax changes in mind) but then so did using the OPM system of partnership with lender.

Glad to hear the taps are open again.

online applications has made it a whole load easier now.

Whilst not a business loan, I have just applied for a mortgage promise. Last time around (9 years ago) I went into a bank, gave over all our figures, specified exactly which house I wanted etc and waited for the customer adviser to go off and crunch the numbers.
Now you do it yourself online, you can change your numbers around, play with it and see exactly what you need to do to get what you want. It says the maximum you can borrow so you aren't guessing at what they will let you have.