Mortgage or Directors Loan fall back? Mortgage or Directors Loan fall back?
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  1. #1

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    Default Mortgage or Directors Loan fall back?

    Hi Guru's

    I'm planning to purchase a property at auction. Property needs modernisation, new kitchen and bathroom. Brokers have advised if there are further investigations, besides the home valuation required then mortgage may not be approved within the 28 day window(20 working days). If this does happen, I want to explore the options I have, can I take a loan of £80,000 -£100,000 from the company initially for 6 months, complete the required works. Then re-mortgage the property and pay back the loan with interest to the company.

    What are the things to lookout for? Is this even a option I should be considering, What are the pitfalls?

    Regards,

    Sam

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    This has been covered quite extensively on the forums including a few threads in the last few weeks..

    Have a dig through the posts below as I am sure there has been a question about short term loan for house deposit before.

    First stop really is your accountant though. He can discuss your personal situation and offer advice and alternatives. It may even be a non starter as you would have to meet regulations to be a loan provider for that amount. (That could be to non related people though thinking about it)

    https://www.google.co.uk/search?q=lo...hrome&ie=UTF-8

    And I am looking for something about changes to loans to directors recently...

    Can't find it but some more reading about the timelines of a loan..

    https://www.gov.uk/directors-loans
    Last edited by northernladuk; 23rd August 2013 at 11:33.
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  3. #3

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    Quote Originally Posted by sapsam View Post
    Hi Guru's

    I'm planning to purchase a property at auction. Property needs modernisation, new kitchen and bathroom. Brokers have advised if there are further investigations, besides the home valuation required then mortgage may not be approved within the 28 day window(20 working days). If this does happen, I want to explore the options I have, can I take a loan of £80,000 -£100,000 from the company initially for 6 months, complete the required works. Then re-mortgage the property and pay back the loan with interest to the company.

    What are the things to lookout for? Is this even a option I should be considering, What are the pitfalls?

    Regards,

    Sam
    Hi Sam,

    The only point I would be mindful of if you purchase with cash is that with most lenders you will have to wait 6 months before they will allow you to remortgage the property.

    There are literally only 1-2 lenders who will allow you to remortgage within 6 months so if your plan is to remortgage the property as soon as the completion has gone through you will be severly limited to choice of lenders.

    Hope that helps?

    Ben

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    Quote Originally Posted by Power Mortgages Ltd View Post
    Hi Sam,

    The only point I would be mindful of if you purchase with cash is that with most lenders you will have to wait 6 months before they will allow you to remortgage the property.

    There are literally only 1-2 lenders who will allow you to remortgage within 6 months so if your plan is to remortgage the property as soon as the completion has gone through you will be severly limited to choice of lenders.

    Hope that helps?

    Ben
    Thanks Ben, That is a point I was not aware off, However considering it might take 6 months to get the house modernised in order works well in the plan.

  5. #5

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    Hmmm, maybe I am reading in to the wording but you are saying

    Brokers have advised if there are further investigations, besides the home valuation required then mortgage may not be approved within the 28 day window(20 working days).
    and then you say...

    If this does happen, I want to explore the options I have, can I take a loan of £80,000 -£100,000 from the company initially for 6 months, complete the required works.
    Required works? Required by the brokers to approve the mortgage? How will that work. You won't have a mortgage to actually buy the property to spend 6 months on it... or am I taking it too literally?

    Do you mean required works as part of your investment to then sell high?

    What happens if the brokers refuse or severely undervalue the house?
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    Quote Originally Posted by northernladuk View Post
    Hmmm, maybe I am reading in to the wording but you are saying



    and then you say...



    Required works? Required by the brokers to approve the mortgage? How will that work. You won't have a mortgage to actually buy the property to spend 6 months on it... or am I taking it too literally?

    Do you mean required works as part of your investment to then sell high?

    What happens if the brokers refuse or severely undervalue the house?
    My question was if the Mortgage completion takes too long, can I fall back on directors loan, in order to make payment within the 28 day window. I understand the answer is yes with some caveats, thanks for links. Then I can renovate the property and re-mortgage to re-pay the directors loan with interest. or even sell if I get a good price.

    Regards,

    Sam

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    Quote Originally Posted by sapsam View Post
    My question was if the Mortgage completion takes too long, can I fall back on directors loan, in order to make payment within the 28 day window. I understand the answer is yes with some caveats, thanks for links. Then I can renovate the property and re-mortgage to re-pay the directors loan with interest. or even sell if I get a good price.

    Regards,

    Sam
    Ah then yes I guess you can. I think the basics are in the other links, 4% interest, S455 after 9 months of year end and stuff. Better than losing the deal though.
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