I've got a 100% mortgage from 2006 - how far up sh*t creek am I?!

[flamingnora]

Bought my first flat in Feb 06 with a 100% mortgage. One bad flat in London with no garden - we HAVE to move pretty sharpish as life with me, DP and 8 month old DD will shortly become unbearable! Good news is, I have done a fair amount of work (brand new boiler, new kitchen, wooden floors throughout, lovely antique gas fire in living room instead of manky old bar fire etc) & am now earning double what I earnt when I took mortage out. Bad news is that, although I have excellent credit rating, I STILL have no savings to speak of, so no deposit. Mortage term comes to an end in Feb next year. Reckon nobody wil be buying then so intend to remortgage & rent it out. Do you think this is going to be possible or am I living in a dream world?!

Hi flamingnora

I work in fin sers and would say it is v unlikely you will be able to get 100% mortgage again. You haven't said whether you have made any equity in your current property which could be used as deposit on new property. Problem is that the banks are short of funds to lend so they are being very choosy and a lot of the deals are 15 - 20% deposit. Good news is that there is usually someone that will lend if you have excellent credit rating - bad news is that it may well cost you more (mthly and arrangement fee) and take a while to find. Go to a mortgage broker as they tend to have a feel for who is lending what to whom.

Hi Choogirl! Yep, you have confimred what I thought - thanks! I don't know if I have built up equity in the property. It seems likely that I have probably done so but probably not enough to constitute a 20% deposit (though it's so hard to tell in a market where people are simply not buying because nobody can get credit!). I'll def go to an independent FA. Do you think I should go soon if I want to move in Feb/March? Or should I wait in case the market picks up a bit?

No-one knows what the markets are going to do, so I'd never advise waiting in case they pick up. You should def go to IFA - you don't need to rush if you don't want to move until March as I believe that even if you are offered a mortgage it has an expiry of 3 - 6 months if you don't take the funds. You can usually get an agreement in principle (AIP) to see how much a lender is willing to advance before you start looking. Also try your existing lender first (unless they are B&B or Northern Rock).

With the current cost of arrangement fees you may well be better off just staying on your SVR after your fixed rate finishes.

Don't forget that if you intend to rent out the property, you will probably not be offered such a favourablle rate on any remortgage. If you are planning on moving anyway, get an agent in now to give you a realistic valuation of the property in today's market and then at least you know if you are likely to have any equity when it comes to remorgtgage.

If you rent it out, just keep your existing mortgage.... No one need know

If you have a buy to let mortgage and sell your property you may (I think - please check this) become liable for capital gains tax.

So keep shtum!

Little Wee Pickle - that is really bad advice. If the OP lets the flat without telling her lender she puts herself at risk, and also her tenants will not have any proper 'rights'.

It's bad advice in several ways. From a practical point of view, it's ill-informed. As well as the risks you would expose yourself and your tenants to, LWP is wrong about the tax implications. Once you own two properties, one of them ceases to count as your principal residence, and you become liable for CGT on that whatever the nature of your mortgage.

From an ethical point of view, it's also bad advice. Given what we know about the effect that buy to let mania has had on the property market and the credit scene, advocating doing it in a way that evades legitimate tax responsibilities is pretty charmless.

I think you need to get it valued asap. With the falls in prices it may be that you haven't built up any equity despite the work you've done. You need to know where you stand so that you can make an informed decision

You may not have equity - we bought our house 3 bed end terrace in "desirable" area of cardiff in feb 06 - its now on the market for 5 grand less than it was when we bought it - and we turned the garden from a wilderness into a great garden with decking etc, added fab fireplace, completely redecorated, fixed central heating etc. We have to move as DH got new job so we will loose out a bit. unfortunately can't afford to rent in tou, will not rent at a high enough amount to cover us renting a similar property where we want to go!