The nervous wait to exchange....

[Semple]

Hi all, we have recently got a mortage accepted on a house at 230k. We then carried out a builders survey and some items for immediate attention have came up.

We have agreed with the seller that £1600 would be taken off the house to help pay for some of these fixes.

The problem is we won't see the money if it just comes off the mortage as it will only reduce the payments by £5 a month.

Is there a way to work this out where we keep the mortage at 230 but get the £1600 in cash either before or after the sale?

As russinating says, you'll just remove this money from your deposit.

However this goes on the assumption that you're not on an LTV boundary.

For example:
Original price is 230k, if you had a 23k deposit that gives you an LTV of 90%
Reduced price is 228.4k, with a reduced deposit of 21.4k now gives you an LTV of 90.6%

Which would mean your mortgage payments would go up because of the higher LTV bracket.

 

[Semple]

We've finally had quite a bit of movement today. All final enquiries have been replied to, and we're now pushing for exchange on Friday (fingers crossed) with completion for the Friday after.

I've gotta go to the bank to make full payment of exchange and completion deposit + settle full balance. It's going to be one expensive day!

 

[Mr Jack]

Is there a way to work this out where we keep the mortage at 230 but get the £1600 in cash either before or after the sale?

It is possible to borrow money for works but usually only where it increases the value of the house by a similar amount. I'm not sure they'd be interested at such a small sum either. It's usually for major renovations.

 

[Russinating]

As russinating says, you'll just remove this money from your deposit.

However this goes on the assumption that you're not on an LTV boundary.

For example:
Original price is 230k, if you had a 23k deposit that gives you an LTV of 90%
Reduced price is 228.4k, with a reduced deposit of 21.4k now gives you an LTV of 90.6%

Which would mean your mortgage payments would go up because of the higher LTV bracket.

Good point! Damn percentages...

 

[jonnylaris]

As russinating says, you'll just remove this money from your deposit.

However this goes on the assumption that you're not on an LTV boundary.

For example:
Original price is 230k, if you had a 23k deposit that gives you an LTV of 90%
Reduced price is 228.4k, with a reduced deposit of 21.4k now gives you an LTV of 90.6%

Which would mean your mortgage payments would go up because of the higher LTV bracket.

It's a 90% mortgage so we can't increase the LTV.

I'm thinking the best way might be to make a deal with the seller so they give us the money after the sale goes through? Bit of a risk but I can't see any other option really.

 

[Semple]

It's a 90% mortgage so we can't increase the LTV.

I'm thinking the best way might be to make a deal with the seller so they give us the money after the sale goes through? Bit of a risk but I can't see any other option really.

It's a possibility yes, i had a friend who was buying a house where there were some major works needed doing (i think there was a wall that needed underpinning or something), the vendor couldn't afford to pay for the works, so it was agreed (in a legal document) that upon completion the vendor would return some of the deposit in order to pay for the works.

How major are the works?

You really need to avoid dipping into the deposit as that'll decrease your LTV putting you at slightly worse rates.

Just for reference, with halifax on a 5-year-fixed 35 year term mortgage without fee:
- At 23k deposit (10%) = £765/mth
- At 21.4k deposit (9.4%) = £900/mth

As you can see, by sticking with the lower rate, you could save that £1600 in just under a year.

Do you have other forms of credit? or ability to borrow from friends/family?

 

[Mr Jack]

I'm thinking the best way might be to make a deal with the seller so they give us the money after the sale goes through? Bit of a risk but I can't see any other option really.

This, I believe, is an absolute legal landmine. Don't do it.

 

[jonnylaris]

It's a possibility yes, i had a friend who was buying a house where there were some major works needed doing (i think there was a wall that needed underpinning or something), the vendor couldn't afford to pay for the works, so it was agreed (in a legal document) that upon completion the vendor would return some of the deposit in order to pay for the works.

How major are the works?

You really need to avoid dipping into the deposit as that'll decrease your LTV putting you at slightly worse rates.

Just for reference, with halifax on a 5-year-fixed 35 year term mortgage without fee:
- At 23k deposit (10%) = £765/mth
- At 21.4k deposit (9.4%) = £900/mth

As you can see, by sticking with the lower rate, you could save that £1600 in just under a year.

Do you have other forms of credit? or ability to borrow from friends/family?

We can get a loan to cover the work, it's around 10k in total to do everything that was brought up by the surveyor.

I just thought that it would be better to get the £1600 in cash so that we don't end up paying interest on it.

 

[Semple]

We can get a loan to cover the work, it's around 10k in total to do everything that was brought up by the surveyor.

Is that 10k of major works? - if so why have you only negotiated 1600 off? i would be pushing for at least half.

If that 10k is mostly minor cosmetic works, then these things can be done over time.

I just thought that it would be better to get the £1600 in cash so that we don't end up paying interest on it.

Unless you can borrow the cash, you'll be stung for interest either way:
- Reducing your deposit thus reducing your LTV increases your monthly payments (see my example above)
- Securing a bank loan will also have interest

How exactly were you planning to pay for the other £8.4k worth of works?

 

[jonnylaris]

Is that 10k of major works? - if so why have you only negotiated 1600 off? i would be pushing for at least half.

If that 10k is mostly minor cosmetic works, then these things can be done over time.

Unless you can borrow the cash, you'll be stung for interest either way:
- Reducing your deposit thus reducing your LTV increases your monthly payments (see my example above)
- Securing a bank loan will also have interest

How exactly were you planning to pay for the other £8.4k worth of works?

Out of the 10k worth of works, 2k is pretty major stuff like electrics and getting the entire house sprayed to treat woodworm. So we negotiated £1600.

We would be getting a loan of around 7k and putting in another 3k of our own savings.

 

[Semple]

Out of the 10k worth of works, 2k is pretty major stuff like electrics and getting the entire house sprayed to treat woodworm. So we negotiated £1600.

We would be getting a loan of around 7k and putting in another 3k of our own savings.

Ah that's fair enough.

You need to work out which route is cheapest for you then.

Remember though if your mortgage is fixed for 5 years and you drop into the lower LTV tier, using the above example it would cost you £8.1k in additional payments (whilst that's not completely all interest, it'll still be a high amount).

I would almost bet that a bank loan would be significantly cheaper, a quick quote on Halifax to borrow 7.5k over 4 years means the loan will cost you ~£540 in interest.

 

[jonnylaris]

Ah that's fair enough.

You need to work out which route is cheapest for you then.

Remember though if your mortgage is fixed for 5 years and you drop into the lower LTV tier, using the above example it would cost you £8.1k in additional payments (whilst that's not completely all interest, it'll still be a high amount).

I would almost bet that a bank loan would be significantly cheaper, a quick quote on Halifax to borrow 7.5k over 4 years means the loan will cost you ~£540 in interest.

Yep, I think you are right. Extending the bank loan for an extra 1.6k in the grand scheme of things isn't a big deal really!

 

[toshj]

Yeah you've got yourself into a bit of a predicament.

Personally i believe if things do go down a GE route (which based on last night seems highly likely now), the last thing on the governments mind is discussion on changes of stamp duty. Brexit is the obvious front runner in all discussions and everything else is being left behind. That could mean anything non-Brexit related gets shunted back to early 2020. It's a gamble on your part really, how did your sellers take the news about you wanting to delay exchange?

There's also still the threat of house prices taking a tumble (even if only a few %), your sellers will have to consider whether they take the risk that you won't pull out if house prices do drop slightly, or do they take their chances and put it back on the market.

Our hope was that a no deal would lead to an emergency budget, with a cut in stamp duty mooted as a potential bargaining chip to get that part of the economy moving. It was a long shot but not totally out of the equation.

Looks much less likely now though.

 

[Semple]

Finally feels like we can breathe a bit now. Confirmed exchange date of tomorrow and completion next friday.

 

[HoneyBadger]

Finally feels like we can breathe a bit now. Confirmed exchange date of tomorrow and completion next friday.

Congratulations!

 

[EGuitarStar]

Few of us there completing in September at the moment. My completion date is the 20th but we visiting next Friday to measure up area for washing machine and a few other bits n bobs.

 

[IvanDobskey]

Got first batch of search results back. Minor risk of flooding (there's a river a couple of hundred meters away) and minor risk of ground instability. Not quite sure why this has come up though, no trees or history of subsidence in the area. Strange.

 

[koolpc]

Got first batch of search results back. Minor risk of flooding (there's a river a couple of hundred meters away) and minor risk of ground instability. Not quite sure why this has come up though, no trees or history of subsidence in the area. Strange.

Mines near by?

 

[Steeps]

Just had my MOS through from agent. Exchange by 02-Oct, complete by 16-Oct, hoping the rest of the process is smooth. Need to take up drinking so I buy other rubbish instead of impulse buying a flat.

 

[Semple]

Got first batch of search results back. Minor risk of flooding (there's a river a couple of hundred meters away) and minor risk of ground instability. Not quite sure why this has come up though, no trees or history of subsidence in the area. Strange.

Most risks of ground instability is usually caused by infilled land near the property. Your searches should show why it's flagged as minor risk of ground instability.