£100k shortfall on second home

by Readers Question

9:57 AM, 12th September 2016
About 4 years ago

£100k shortfall on second home

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£100k shortfall on second home

I have found a house that would I would like to buy as my main residential property. Although I wasn’t looking to move, it’s a very good price and I would end up making approx £400k on it after a new kitchen and some cosmetic work.shortfall

The problem is, I already have a house which I would have to let out and port my current residential mortgage to the new property. After the calculations and based on the cost of the new property, I am £100k short. I have asked the vendors if they would be interested in my offer but based on me paying them the shortfall in say 2 years time on the sale of my first property. There would be a huge incentive for me to sell as I would get a refund of the extra 3% stamp duty I would pay on the second property.

My question is what would be the best way to wrap the £100k shortfall into an attractive package for them so they feel confident that they will get the final payment for their property? I am going to offer 5% interest pa and my solicitor has mentioned a unilateral notice with an enforceable contract.

I have £600k equity on my current house and £100k equity on a holiday house.

Any advice would be much appreciated.


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Neil Patterson

10:01 AM, 12th September 2016
About 4 years ago

Hi Sally,

It may be a stretch to get vendors to agree to this as they are carrying all the risk.

Would it not be a lot easier to raise equity on your current property using a Buy to Let mortgage or have I misunderstood the situation.

Sally Tattersall

11:24 AM, 12th September 2016
About 4 years ago

Reply to the comment left by "Neil Patterson" at "12/09/2016 - 10:01":

Yes you have! I will be changing my current residential mortgage to a BTL, renting my current house out and porting by residential mortgage to new house. I have raised £925,000 but am still £100,000 short which I have offered to pay them in 2/3 years.

I am asking the best way to have this written up legally to satisfy the vendors that it will get paid back.

Michael Barnes

13:09 PM, 12th September 2016
About 4 years ago

If they are ok with deferred payment, then my thoughts are:
1. A charge on each of your properties, so that if you sell then they get their money.
2. A legally-binding agreement (a Deed?) such that if you have not repaid by a specified date, then they can force the sale of one or more of your properties to get their money and costs.
3. Suitable interest payment (if it were me, I would want it linked to base rate).

This is probably something like you have already been advised by your solicitor.

John Constant

13:09 PM, 12th September 2016
About 4 years ago

Reply to the comment left by "Sally Tattersall" at "12/09/2016 - 11:24":

Sally, despite your answer to Neil above, I would be interested to see what arrangements have been made on the BTL remortgage of your current property. Have you raised as much money as you can based on your current property's LTV or on the maximum rent that you can charge?
In order to help you consider other alternatives as far as lenders are concerned, please be aware that BTL mortgages can be taken up to 85%LTV and we have certain lenders who still work on pay rate, rather than an artificial "stressed" rate, which would enable you to borrow more.
If you would like us (HD Consultants) to look at this a little more closely, please ask Neil to pass your contact details on to me.

Sally Tattersall

13:15 PM, 12th September 2016
About 4 years ago

Reply to the comment left by "John Constant" at "12/09/2016 - 13:09":

Hello John, could you give me your contact details and I will contact you? Thanks

Neil Patterson

13:45 PM, 12th September 2016
About 4 years ago

Hi Sally,

You can contact John through his members profile 🙂

Please see >> https://www.property118.com/member/?id=1313

John Constant

13:58 PM, 12th September 2016
About 4 years ago

Reply to the comment left by "Sally Tattersall" at "12/09/2016 - 13:15":

Sally, please feel free to call me on 07751042485.

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