Should I take out a personal loan to cover gap caused due to low valuation?

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    Should I take out a personal loan to cover gap caused due to low valuation?

    Good afternoon everyone

    I’m trying to purchase my 2nd BTL and, whilst the property purchase price valuation has came back fine, the rental income is far lower than expected, causing a shortfall of about £12k. We’re appealing but, in the meantime, i’m thinking of mitigations. We probabably need to find another £8k and the cheapest way (and most flexible in terms of rapid repayment) of doing this would be via a personal loan (badging the loan for ‘home improvements’).

    My credit rating/income is solid so i’m Confident of acceptance.

    Good/bad idea????

    Thanks in anticipation.

    #2
    You would need to declare the loan to the lender: Who would then reduce his mortgage amount by at least £12k: (Probably more as loan will likely be more expensive than mortgage).
    badging the loan for ‘home improvements’...
    - would be fraud, a criminal offence.

    Whatever happened to those British traditions of decency, honesty & fair-play?

    NB You may wish to learn about the Hunter system, which spots crooks and cheats: Who are then unable to get a sensibly priced mortgage ever again ... perhaps never get a mortgage at all again...
    https://www.telegraph.co.uk/finance/...borrowers.html
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      Can I please ask what the validated rental is ,the purchase price and loan required , I appreciate that you have had a valuation but valuers cannot be accurate within 5% of the value.

      Rather than doing a personal loan ( acknowledged as being the cheapest) there is also the second charge regime subject to the 1st mortgageee agreeing which whilst higher might be preferable.

      If your income excluding rental is strong then raising a PL should become a problem but the lender would need to understand why the balance of the PP monies are remanating from this avenue of finance.

      Did you place the mortgage yourself or via a broker, if the latter get him yo v
      challlende the decision.

      Comment


        #4
        You can't manage to self loan £12K? This sounds highly dangerous to me if you are so cash strapped. What will you do when you need £12K to do emergency repairs? Or when mortgage rates double? Or when you have a tenant related incident that costs you 20K. You will be bankrupt right?

        Most people overestimate net long-term rental income. Perhaps you have received a misguided assessment. Or perhaps you are being sent a message from someone up high.

        Comment


          #5
          FAO ArtfulLodger - thanks, tone aside, your response is v helpful. Cheers.

          FAO Loanarranger. Not sure what ‘validated rental’ is but the valuer states £700, I stated £775 (and have provided v similar properties), i’d settle for £750ish. Purchase is £180k, wanted a loan of £128k but am currently offered £116k.

          As it’s a purchase, is a 2nd charge likely? Presumably this would need to be a second lender, a specialist one? I presume you meant a PL SHOULDNT become a problem??? If so, do you subscribe to ArtfulLodger’s view that the lender would deduct the value of the loan from the mortgage?

          FAO Andrew: Thanks but I wasn’t inviting a risk assessment of my finances.

          Comment


            #6
            I agree with Andrew (not something I always do!): Further, IMHO you should be able to survive 7 months of no income per property, certainly if only 2, should you hit a void/the-tenant-from-hell/the-agent-from-hell/the-rent-guarantee-scam-from-hell/interesting interest rises/repairs/ etc etc etc...: (NB whilst paying for legal fees, repairs, mortgage etc etc..)

            The need of a personal loan appears to raise question marks over that...

            I had the "pleasure" of living through Bank of England interest rates hitting 17% ( Thatcher....) having jumped 10% in less than 2 years.

            Thank you for your kind words regarding my tone:

            This is an open-to-all forum, provided for free: Anyone can use it, lenders, HMRC, fraud squad. Nice name.....
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

            Comment


              #7
              Originally posted by HenryMorley View Post
              FAO Andrew: Thanks but I wasn’t inviting a risk assessment of my finances.
              Um.... you asked whether taking out a personal loan was a good idea. I said no. Artful said lying to lenders was a bad idea -- you didn't much like his tone. If you want advice with answers you like, suggest you pay an advisor.

              Comment


                #8
                Originally posted by AndrewDod View Post

                Um.... you asked whether taking out a personal loan was a good idea. I said no. Artful said lying to lenders was a bad idea -- you didn't much like his tone. If you want advice with answers you like, suggest you pay an advisor.
                You managed to offer no insight re funding options to close the gap yet were happy to wax lyrical about an unforeseen £20k bill and question whether I should self loan or invest at all. I’m quite happy with critical advice or challenge - yours was self righteous waffle.

                Comment


                  #9
                  Insight? Find another investment, with some fat.

                  Just my view, feel free to ignore.

                  Renting is a people business: Communication in a humane manner key (even under duress).
                  I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                  Comment


                    #10
                    Firstly apologies for the typo in my response so lets put some clarity into your problem.

                    The rental income as confirmed by the valuer is £700 notwithstanding your assessment , which might be right but again could be viewed as optimistic. So a couple of questions please , the responses could elicit an alternative lender whose stress calculations could still provide the sized loan which you are seeking without having to borrow monies.

                    1) Is your personal income/self employed income below £25000 or above
                    2) How many BtL's do you own
                    3) Is there anything quirky about the property, e.g ExCouncil Flat , Unusual Construction or is is a standard house or purpose built flat.
                    4) Which lender did you apply to.

                    If you provide this information I will do research and identify possible lenders who might be able to assist, yes you would have to pay a new valuation fee but this could be significantly cheaper than a Personal Loan or indeed a Second charge.

                    Comment


                      #11
                      Thanks in advance!

                      1. Salary is c £75k and rental income of £1k. Wife’s is only £8k + £9k rental income.
                      2. This would be my second if successful.
                      3. Nope. Freehold, to be let to employed people. Not a HMO.
                      4. The Mortgage Works

                      i thought stress rate calculations were pretty much ‘set’, no?

                      Comment


                        #12
                        Without being funny “ Trust me I am a broker !!”

                        No not all lenders exercise the same stress calculation so tomorrow when I gear up the computer I will source lenders who can accommodate your borrowing requirements based on a rental income of £700. I will post the info onto the forum rather than by PM in order that it can also help others who might experience similar difficulties .

                        Out of curiosity did you source TMW yourself or did you get a recommendation from a broker ?

                        Comment


                          #13
                          Originally posted by HenryMorley View Post
                          "i thought stress rate calculations were pretty much ‘set’, no"
                          Cross posted with loanarranger.

                          But, no.
                          Last edited by boletus; 07-05-2018, 21:27 PM. Reason: as above.

                          Comment


                            #14
                            I have done initial checks and I am detailing three categories for Fixed Rates , 2, 3 and 5 years. There are of course tracker rates etc available but this is a short list simply based on income, rental as confirmed but I do not endorse any lender within the list as you are not a client.

                            2 years Fixed
                            Barclays 1.97%
                            Santander 2.09%
                            MetroBank 2.49%
                            Fleet Mortgages 2.99%

                            3 Year Fixed
                            Barclays 2.39%
                            Metro 2.49%
                            Furness 3.09%

                            5 Year Fixed
                            Metro Bank 2.69%
                            Nottingham BS 2.75%
                            Barclays 2.74%
                            BM Solutions 2.89%

                            Please note that each lender will charge a Product Completion Fee either a percentage of the loan, a fixed sum plus possible valuation and Product Booking Fees. It is important to to check the lenders reversionary rates as a backstopif circumstances do not permit a Remortgage at the end of the initial incentive period.

                            There are numerous other lenders who have stress rates that will allow you to borrow but their rates are different to those mentioned.

                            Hope this helps you.

                            Comment


                              #15
                              Originally posted by loanarranger View Post
                              Out of curiosity did you source TMW yourself or did you get a recommendation from a broker ?
                              Alas, TMW can only be sourced via an intermediary.



                              Comment

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