I have a question for you and I am really hoping that you can give me a positive answer with a way forward on a holiday let re-mortgage. My enquiries so far have drawn a blank.
Just quickly to explain the situation to you.
We have just completed on the purchase of a property in Devon, that will be used as a holiday let investment.
There was lots of interested in this property, so we said we were cash buyers in order to be more attractive to the vendor. This wasn’t strictly true because we were intending to raise money on our own home at a cheap interest rate to add to our existing savings.
We had £300k in savings/liquid assets and so were short of £280k. I approached our residential lender, with whom we have an excellent deal but are tied in for another few years. I told them that I was using the money to buy another property and all was going well with my request for this further advance until I told them that the purchase was to be for a holiday property. They were very quick to say that this would be classed as business use and so outside their lending criteria. I was really stuck. I couldn’t go back to the estate agents and say that I now needed a holiday let mortgage on the purchase because they would have sold it to someone else
At this point, my parents stepped in gave us what amounted to their entire savings pot, on the proviso that we pay them back ASAP.
So I did some checking to make sure I could remortgage quickly after the purchase completed, in order to be able to give my parents their money back. I telephoned a building society that provides holiday let re-mortgage products and spoke to someone at their call centre. I was told that I would have to wait for 6 months after completion, before making the application for a holiday let remortgage. Apart from the time delay, every else was fine.
Allowing for some time to make the application etc., my parents would have their money back after about 8 months, which they were happy with at the time. Unfortunately, something happened, and my parents needed their money back sooner than planned.
I recontacted the lender that I spoke to originally, to see if they would make an exception on the 6 months rule. There was a very flat “no” and now the news is worse. This person asked me what I was going to use the money for and thinking it was no big issue, told them that we were going to pay back some money lent by my parents to purchase the property.
Well, to my surprise, they said, “we can’t do that anyway, it’s debt consolidation”. I argued that it wasn’t, but they would not change their view.
Our questions are:
- Is there a lender that will allow us to apply for a holiday let re-mortgage today?
- Will they allow us to raise £280K to pay back my parents?
We seem to be getting an ever-increasing number of enquiries like this and it is because of the inadequate information available to borrowers, either published or by the lenders telesales agent.
The 6 months month’s criteria rule is not a point of law. It is something that some lenders choose to do to protect themselves. In the fast-rising property market prior to the crash, there were a number of dodgy property transactions, and I am being polite. So, it became common to introduce this “stabilising” delay of 6 months. Most lenders have kept it, but some have not. Where it is still in force, there will be no commonsense applied in your case or any other.
In respect of the “debt consolidation”, I am sure that shocked you somewhat. Unfortunately, nearly all lenders will class paying back parents under the same banner as, say, consolidating credit card debt. I would agree that this is harsh, but it is a common approach.
I can only guess that the reason that “debt consolidation” was not picked up at your initial enquiry, was one of telesales training and experience. The original agent did not ask you the question and of course, you would not have volunteered it because you didn’t not see that this was loan purpose. Sadly, this happens and there is nothing you can do about it.
However, we do have some good news. Through our experience, we know of holiday let remortgage lenders who will apply a commonsense check to the whole situation and they are not bound by the six months rule or use of funds.
If you would like to call the office today, one of our specialist holiday let brokers will start communications with a lender immediately on your behalf.
Kind Regards, Mark