Advice needed on re-finance of inherited properties?

by Readers Question

14:39 PM, 25th September 2018
About 3 months ago

Advice needed on re-finance of inherited properties?

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Advice needed on re-finance of inherited properties?

I’m looking for some advice on how to re-finance 3 properties I have inherited.

My father passed away, leaving me a house and two flats. The lenders are looking for redemption. My only option if I would like to keep these properties with a view to BTL, is to refinance.

The two flats are an old house conversion, held on the same freehold under one mortgage, and the house is under another.

I’m just wondering what my options are? I’m under the impression from brokers that I’ve spoken to that I have everything going against me.

Firstly, lenders don’t like to lend on multi-units, and those that do demand at least a years worth of landlords experience.

I’ve been told my other option is to get short term bridging finance, split the leases, and then refinance. But again I’m reading that lenders do not like to lend on more than a certain percentage of flats in the same block due to over exposure.

Furthermore, I am only 25, and do not already own my own home, my income is under 20k a year, and I gave up work for a long time to care for my father before his death, so had a long period without earning.

My credit history is average. I have a default from 4 years ago, but have never missed a payment since, and am using a small amount of my available credit. No CCJS.

I also inherited all the properties in a pretty poor state, all needing ‘light refurbishment’, which means I will struggle to get a Buy to Let as they are not in a readily lettable condition.

I have spent my spare time when not working doing up the two flats, but my savings are dwindling, having financially supported my father in the year before his death.

Can anyone advise the best way to go about this? I feel like I have been handed a potentially great opportunity, but every avenue seems to be filled with more hurdles.

Thanks

Nikki



Comments

Neil Patterson

14:44 PM, 25th September 2018
About 3 months ago

Hi Nikki,

Unfortunately you are not really selling yourself to lenders with all the conflicting criteria. You will definitely need a commercial finance broker to even consider finding a lender that can consider all of the criteria in one go.

If you do think you would like help please email me all your details on npatterson@property118.com and I will get one of the team to discuss what your options might be.

Michael Barnes

20:09 PM, 25th September 2018
About 3 months ago

if I would like to keep these properties

Do you want to keep them, or would you do better selling some or all?

Laurie

12:44 PM, 26th September 2018
About 3 months ago

Hi Nikki, difficult to give advice based on the limited information, but i would say you need to prioritise the refurbishment and to get the properties in a good condition ASAP. I can see you may have limited time and money, but try to get friends(especially trades or with diy skills) to help. Try to do as much as you can yourself to keep costs down, for the rest you should take a loan just to get it finished. Then the properties will be more rentable and create another income for you and be more attractive to lenders. Or you have the option to sell, but to get the best price and sell quicker, always best to market the property in good condition - so either way, get them renovated. It may help to focus on one at a time, then you will also have some income to help with the next one. Good luck!!

Kate Mellor

23:49 PM, 27th September 2018
About 2 months ago

You don’t mention what the current loan to value is on the properties as this will have a bearing.
If you can get tenants into the properties paying rent, not only will it ease your cash flow issues, but it shows a proven income stream to a potential lender. Can you negotiate a year to gain the experience before you have to redeem the existing borrowing? I’m guessing not, but I’ve no experience in deceased estates, so I’m unsure if lenders are a little more flexible...

Laura Delow

8:46 AM, 29th September 2018
About 2 months ago

Where you are in the process of inheriting the property?
The lender that comes to mind is Birmingham Midshires who will consider:-
- lending on 2 flats on separate titles in the same house i.e. 100% exposure subject to valuers opinion
- they have no minimum earned income criteria
- they deal with first time landlords (aslong as you own your own home with or without a mortgage or it can be evidenced on the Land Registry you have done in the past).
- they will also consider historical adverse credit (your Mortgage Broker needs to discuss the specifics of your adverse history with his BMids Business Development Manager first),
- although normally the property needs to have been owned for 6 months, this is waived if raising money for one of the following reasons: buying out beneficiaries, paying off a mortgage/secured debt against the property or making home improvements to the inherited property.
- they accept inherited properties once you have gone through probate BUT.....
- for BMids to allow finance to be raised on the inherited properties to pay off the current lender(s) / cover the cost of refurbishment, you need to get your solicitor to split the title i.e. freehold plus 2 x e.g. 125 year leases simultaneously to completion of the remortgage(s).
- as a result your Mortgage Broker would submit 2 applications to BMids for e.g. Flat a & Flat b.
This is just a broad outline & specifics need to be discussed with a good Mortgage Broker.

DC

20:18 PM, 4th October 2018
About 2 months ago

Reply to the comment left by Laura Delow at 29/09/2018 - 08:46
Hi Laura
I was looking at your comment about BMid and was wondering if you could help me with a situation that I’m in with them.
I have a BTL mortgage with them which comes to an end in 2 years and I have tried extending it with them but they want proof of my earnings ie salary but I decided to take some time out and do other things and also became a father for the first time and as I am lucky enough to be able to take time out and live off my savings I have no earnings proof and as I have been with them for the past ten years and payments have never been missed and the rent amount now they say doesn’t get taken into account.
The only option I have been given is to return to work and show proof of earnings and I don’t really want to have to do this and really am upset with BMids response.
Is there anything else you can advise me on getting this situation resolved?

Laura Delow

7:39 AM, 5th October 2018
About 2 months ago

Hi DC. You may want to email me at laura.stonard@openwork.uk.com as further clarity about your situation is confidential & not for a public forum e.g. i) how much is the mortgage for ii) is it interest only or repayment iii) how much are your monthly mortgage payments & are these currently on a fixed rate (if so, until when) or on a variable/tracker rate iv) what is the value of the property
v) what is the current monthly rent & tenant type vi) when did you stop earning/working vii) how much did you previously earn before tax & in what capacity i.e. employed/self employed viii) how much savings do you have ix) is there another earner in the household even if not on this mortgage x) if applicable what is the size of the mortgage secured on your home & payment pm xi) a breakdown of all other monthly commitments xii) do you anticipate returning to work & if so when & in what capacity xiii) are you in receipt of benefits & if so, how much.....the list goes on on top of which are the usual questions like age, credit history, dependents, detail of any other properties owned/let out & your overall landlord experience etc.
Although you've always paid your BTL mortgage on time, servicing your commitments on time is only one part of what a lender looks for in an applicant when being asked to either increase the borrowing or extend the term.
BMids state; "We expect to see that the applicant can afford their personal commitments so we can be confident that the lending remains sustainable in the event of tenant voids or maintenance and repair costs incurred. An application to extend the mortgage term may be declined where we determine that there is insufficient disposable income to support the borrowing and the customer's personal commitments. Our rental cover calculation provides for an excess of rent compared to the actual mortgage payment to enable the landlord to cover such eventualities. However if the personal affordability is stretched this may not leave the applicant with the capacity to retain savings. We understand that the personal income may not reflect the overall financial picture for the applicant and they may have other assets and savings available. We also understand that the BTL may be in a single name whilst personal financial commitments may be held jointly with another party. In all cases where the application is subject to manual underwriting, a fully completed Customer Profile Form must be submitted. This helps us to understand the full background to the proposed transaction and we can then make an informed lending decision. Useful information which we will require includes:
- How the customer maintains their commitments
- How they've built up any reserves/savings
- Whether they have previous experience of Buying to Let
- Rationale for sole applications where finances are joint. ....etc.
For all applications, at least one of the applicants needs to be in receipt of earned income and/or pension income but Income from all sources will need to be captured and recorded accurately. This includes all full years of Self Employed income, PAYE, Pension and Gross Annual Rental Income for all rental properties, Benefits
There is no minimum income requirement. An applicant needs to demonstrate they can afford their personal commitments, and in particular residential mortgages must be adequately covered by your client’s current income.


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