Day one remortgage for cash purchase – failed score?

Hi Angus,

Applying for an agreement in principle from Virgin or another lender pre-completion could have highlighted any credit scoring issues unless it is a very recent change to your circumstances.

Yes there are other lenders that will remortgage inside 6 months, but it does depend on LTV, rental income, works carried out etc.

Bridging finance is not intended to be a long term secured loan and would normally require being repaid inside 6 months.

The key to finding a suitable lender is to first understand why you failed the credit score. Have you applied for your Experian and Equifax reports yet to see exactly what is on your credit file. eg in the last 6 years have there been any missed payments recorded, defaults or CCJs. You could even be the victim of fraud without knowing it.

Have you asked your broker yet why there are no other options so you understand what the situation is?

My 1st question is why is it lenders don't like to lend when you have purchased a property for cash and wish to re mortgage within 6 months.

My next advice is to agree with getting your credit score which could still be a lengthy process rectifying your score if you do have adverse credit.

My advice is ask for a low loan to value this way you still get some working capitol back and will probably find the lender will increase the loan to val when you have proved your self to them that your not a risk

Reply to the comment left by "Lee Alderson" at "23/05/2014 - 09:04":

The reticence to remortgage before 6 months is really a hang over from the credit crunch where some lenders lost their shirts on back to back deals which were subsequently perceived as overvalued.

No Money Down deals were a large part to blame and mostly involved mortgage fraud.

Therefore rather than differentiate between different types of deals it is just easier and cheaper for lenders not to do them.

As we are now only buying via limited companies, finding lenders is always a problem. We have found Barclays and Lloyds are willing to help us at around 3.4% above base but only on a repayment basis 🙁

Barclays are lending on the rental income and Lloyds more on the LTV, but neither will really go above 60% LTV (our max for comfort so that's ok with us)

If anyone comes up with a lender who will do interest only for limited companies at reasonable rates, please let me know. I would much rather spend the repayment part on either keeping my existing properties in tip top condition or saving to buy another one, especially as there is no tax relief on that money either.

Try Aldermore

I've just been reading an article in The RLA magazine about Crowd Funding (ie peer to peer lending) for property purchase and refurb. I only know a little about this because I looked at putting some spare cash into ZOPA a while ago. I wondered if any one else had any knowledge about this.

Reply to the comment left by "Neil Patterson" at "23/05/2014 - 08:48":

Hi Neil,

Many thanks for your quick response to my post. To give you a bit more info, I bought the flat jointly with my wife who has a good full time job and high salary. I'm self employed and on paper show a low income and also have some outstanding credit card borrowing from a previous property renovation (circa £30K) which will be paid off as soon as we can obtain a mortgage on the new property.
I recently checked my experian report and it was 'fair' with no missed payments CCJ's etc.
The amount we applied for from Virgin was the purchase price of £182K (excluding renovation costs) but the flat is currently worth around £285k so there's plenty of equity, and rental income will be around £11-1200 pcm
We also have a large amount of equity in our own house and another BTL with good equity.
Our broker thinks we are a good prospect for a lender but Virgin have rejected us on the points scoring.
It's a crazy market out there at the moment for sure 🙂

There are a few points raised in both the original question, and the subsequent replies.

Firstly, Neil's first comment is absolutely spot on. Assuming the initial BTL valuers were only ultimately instructed because in the first place you passed the lenders AIP, it could be that VM then did another credit check / score and new information came to light? In which case, you definitely do need to obtain up to date credit reports from the main credit reference agencies to see if there is any new detrimental information on it.

The '6 month rule' is an internal guideline for those lenders that implement such a strategy. It is not 'the law', a regulation or an industry stipulation. Most lenders use it (simply because they choose to include this boundary in their criteria) but there are lenders who do not use it at all.

To answer the original question and also Linda Price's point at the same time, there are indeed lenders who offer interest only, BTL, long term, within 6 month mortgages - and we arrange this finance for our Clients all the time - up to 75%LTV.

In fact, these deals are also available based on the 'new' open market value, as long as you can substantiate why there is an enhanced value from the date of purchase to the date of the new mortgage being implemented.

I am happy to point out case studies on our website, and also to discuss this in detail based on your own personal and financial situation.

To contact me or any of my team of financial advisers to discuss further (and we can provide either face to face meetings or 'remote' advice throughout the whole of the UK) please click on my profile link above.

Hope this helps.

Howard

Reply to the comment left by "Phillip Moore" at "23/05/2014 - 09:33":

Hi Angus,

You have a lot of positive factors in your favour. Sometimes a lender is just not the right fit for you, but other options I am sure will be.

If you need any help just let me know npatterson@property118.com

limited companies..... I am in the middle of a purchasing challenge... I am buying a property from a limited company - its been owned ages by Ltd. and the Ltd Co has been around ages... so no fly by nighters here !

but I have been turned down by the lender TMW .... so owning properties in a limited vehicle may increase challenges further down the line...

Natwest are talking to me about a capital repayment product at the moment but with a lower LTV than I would like.....