FFS yer another delay. Releasing money for a BT mortgage at exchange

(14 Posts)
NoPlanYet Tue 07-Jun-16 18:22:59

We're hoping to exchange any day, complete Aug. Not my choice but the rest of the chain demands it.
We're withdrawing cash from out current fucking unsellable flat to be a deposit for new forever home. Renting the flat out for a couple of years then selling it hopefully.

BTL (actually LTB) mortgage provider won't release funds until completion as they say once funds are released then we can't live there. But how are we supposed to find deposit to exchange on new place without funds released? Is this normal? Do people doing this normally have to find 5 or 10% deposit between exchange and complete from their savings? It's 65k if 10% so quite a lot!

Grateful for anyone's experiences

wowfudge Tue 07-Jun-16 19:46:03

Can't your solicitor advise? As you are in a chain no money actually goes anywhere at exchange. What about exchange and completion on the same day? Not ideal, but far from unusual.

whois Tue 07-Jun-16 20:03:44

IS it just the living there that is an issue? Could you move out and stay with friends for a short period?

CotswoldStrife Tue 07-Jun-16 20:10:03

Tricky - as no-one is buying your flat, there is no chain below you to use a deposit from!

Will the mortgage company release the deposit or can you borrow it from the bank (if you really don't have it) for a short period? It is normal to have to put down a deposit (5 or 10 per cent) at exchange, surely your solicitor has mentioned this before as you usually have to prove where the money came from as well?

NoPlanYet Tue 07-Jun-16 22:21:40

Our solicitor was working on the assumption we'd draw the funds down on exchange and use some for a deposit, then the rest would go through on completion.
He's trying to talk to the mortgage company to persuade them.

I have no idea what is normal here so am keen to find out what others have done.

Not really possible to move out for 2 months as we have a toddler, a cat and lots of stuff, and jobs etc.

Also not keen to exchange and complete on the same day. We've been trying to sort this move for over a year (buyers and purchases have fallen through all over the place) and we just want to move. We own one place and are buying a second so I fail to see why we can't live in either of those.

Has anyone else been in this position?

QueenStromba Wed 08-Jun-16 10:31:21

If you're this financially clueless are you sure that you're doing the right thing here? For example, are you aware that you'll have to pay an extra 3% stamp duty on your new home? Do you know about Clause 24 which means that mortgage interest is no longer tax deductible? You instead get a tax credit for 20% of the mortgage interest. This can push you from being a basic rate tax payer to a higher rate tax payer and will reduce any tax credits you currently get. Are you aware of the legal responsibilities of a landlord e.g. protection of deposits, gas safety checks, ensuring that any tenants have the right to live in the UK, area dependent landlord licences etc? Do you know how much letting fees cost? Can you access large sums of money quickly if the boiler in your BTL breaks down and needs to be replaced?

NoPlanYet Wed 08-Jun-16 13:45:28

I'm not sure why you have concluded I'm financially clueless but yes I am aware of each of the things you mention in your email. I'm currently a higher rate tax payer and I have access to large amounts of money to fix things if needed. Oh and my boiler is new and has a 5 year warranty so no chance of a high bill there.

My issue is that my solicitor seems to be trying to do something which the mortgage company say isn't possible. One of them is either wrong or incompetent.

Our solicitor, who was recently made a partner in his practice so we have good reason to trust and his job is being a conveyancing solicitor told us he would draw the funds down on exchange. He advised this because he said in his experience the company (one of the two main /only ones who do LTB mortgages) can be flakey and he thinks there is a risk they'll renege on their mortgage offer if we have 2 months between exchange and complete.

We took his advice and agreed to draw down the funds to ensure we have the money for the onwards purchase. I normally do what my solicitor advises me to.

Om other points: I'm alreasy aware that if I sell within 3 years I get my extra stamp duty refunded, which is why I mention selling in 2 years above.

I'm looking for the experience of anyone who has been in this position to help me understand if my solicitor is being a weirdo asking for something which is completely non-standard, or if the mortgage company are being awkward.

I'd appreciate any helpful advice rather than someone making frankly bizarre assertions that I'm financially incompetent. But thanks for replying anyway.

QueenStromba Wed 08-Jun-16 14:19:39

Well, you seemed surprised that you needed a deposit on the new house despite going through the house purchase procedure before. Plus, either you didn't know about all of the stuff that I mentioned or you did and still thought it was a good idea. What makes you think that your 'fucking unsellable' flat is going to be any less unsellable in two years time anyway? This is a time when anyone with an ounce of sense is trying to get out of BTL - in a couple of years everyone will want out and the market will be saturated with flats.

Anyway, since you're so clued up you don't need me to tell you that the financial product you need is a bridging loan.

NoPlanYet Wed 08-Jun-16 14:52:24

Our solicitor told is that we would use funds withdrawn from the flat we currently own, ie the LTB mortgage ( flat worth 450, we have 140 mortgage unpaid. Based on rental yield we can take out a LTB mortgage of 270 thus meaning we pay off mortgage and have 130 left) to use as deposit for new house.

This is the absolutely bog standard process when you own one house and want to keep it and buy another.

My issue is the the mortgage company are saying we won't get any cash until completion day, whereas my solicitor seems to think it is standard practice that we get the cash on exchange, use some for a deposit and leave the rest sitting there, then in Co pletuon the rest flows across.

My question is who else has been in this position of remortgaging one property to get a deposit to pa y for a second.

The flat will be sellable in reality. I've just been extremely unlucky with buyers pulling out due to redundancy and massively over cautious reactions to a survey. All of that fun is detailed on other threads if you ever get insomnia. I'm not trying to enter the BTL market, just trying to have an interim solution which we can afford so we can make a big location and lifestyle change now rather than waiting for the stars to align and for my 4th/5th/6th set of buyers and vendors to work out on the same day. I've already tried and failed 3 times so I'm doing this as a temporary measure. Next time I sell the pressure will be off since I won't be trying to buy on the same day, which will.make it all easier and less stressful.

I don't need a product. I need a solicitor and/or mortgage company to agree on what is the normal process for this and to tell me what to do. I am currently caught in the middle of two.professionals with differing views which is why I came onto MN yo see if anyone else has ever done this before to get some views on what is normal.

redhat Wed 08-Jun-16 14:57:33

I'm confused. Are you increasing the mortgage on your current property to buy the new property?

redhat Wed 08-Jun-16 15:01:52

Anyway, what generally happens is either a bridging loan or simultaneous exchange and completion.

NoPlanYet Wed 08-Jun-16 15:10:41

Yep.

I've spoken to 2 mortgage brokers, entirely unrelated. And apparently (I found out 6 months ago) this is normal.

You take out the max cash possible from your current home. That pays off the remaining mortgage and leaves you with a nice lump left over.

The lump becomes your deposit for the next place you want to buy.

This is a Buy To Let (BTL) if you stay in your current place and rent out the new one, or a Let To Buy (LTB) if you rant out the old place and move into the new one.

Normally the mortgage on the place you're renting out becomes interest only, and the place you live in you make interest+repayment. This is most efficient re tax etc. It makes sense to plough all your money into paying off the repayment mortgage ASAP, as the interest payment is tax deductible. Although that is changing over the next 4 years, but even after that it will still effectively be a little bit tax deductible, so putting an extra £100pm into your repayment mortgage and leaving the rental mortgage as interest only makes most sense until you have fully paid off the residential mortgage.

I have now heard from the solicitor and apparently out issue is that our exchange-completion period is 2 months. 'Normally' it would be 2 weeks and they'd be happy to give the money early, but 2 months is a bit long.

Thanksfully we do actually have 5% in savings and have argued the deposit down to 5% (because of the long exchange period, sinking 65k for 2 months felt wrong) so we can pay in exchange and then hope the mortgage company don't change their minds before completion. If they do then we'll cross that bridge then...

There is no reason at all to think they will change our minds, the sums add up comfortably. However our solicitor advised us this company sometimes do.

All so stressful angry

HereIAm20 Wed 08-Jun-16 16:38:17

We did a LTB because we want to keep our house in the country but moved into town to be closer to son's school (independent - before I get accused of catchment chasing). I have never heard of funds being available from exchange just usually come through day or 2 before completion. We had n offset mortgage so had enough savings in their to fund our £65,000 deposit from that and then reimbursed the savings when the mortgage came through. I am a solicitor (but not a conveyancing one).

HereIAm20 Wed 08-Jun-16 16:38:47

good grief - their! There

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