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  • Mortgages & Finance

    Releasing equity

    Hi I am hoping for some feedback or suggestions to release cash.

    I currently have 2 properties 1 has 75% mortgage and the other below

    Is a leasehold in an ex local authority 2 bed in a tower block that had to be bought cash as banks wouldn’t mortgage it due to risk of resale. I couldn’t understand this and got vague explanation. It’s very central close to amenities in Bristol on 5th floor of a Tower block. It’s value at £120,000. I want to release money (possibly 25k) from it to buy another property (terrace house). Can anyone give suggestions on where I could get a loan on the strength of the flat? I was told banks do this with tower blocks. They mortgage so many then stop for a while. So I believe going back to the bank may be an option. I am just wondering if there are any other options?

    Thanks.

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    Colin, there could be an issue here due to a lenders exposure in the flat. They will usually go to a certain percentage and then limit their exposure with anymore borrowing.

    As ever, in order to get you from A to B, we need to know where A is. We need to know what your full circumstances are.

    Please feel free to contact us to see what we can do for you. I would like to think that this shouldn't be too difficult. We know the lenders who will do this  but we need to know your full circumstances.


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    There are two issues, initially, it is that it is in a block of flats. Mortgage lenders are typically not eager to lend on Flats. Especially ones with lots of floors or open deck access. It is also very location dependent.

    The other issue is that it is "ex-local authority", mortgage lenders do not like it when a block is owned/managed by a local authority. As it suggests that they have majority ownership of the flats in the block.

    This means you as a leaseholder have somewhat fewer rights, unable to enfranchise or take over management. This is a concern as Local Authorities have previous in raising bill bills, in some cases (allegedly) raising big bills for other leaseholders but not themselves.

    These will be why you are finding it difficult to get a mortgage.

    Though the team at Bespoke Finance always loves a challenge and would be eager to assess what kind of Finance we would be able to obtain for you Colin. We have helped landlords buy in many tower-blocks, using the specialist and fridge lenders if the mainstream is not eager.

    It is a bit of research, asking a surveyor to take an opinion prior to an application and assessing the % ownership of a block. Though these challenging cases are what mortgage advisers are here for.

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    My posts are not financial advice, just a rambling guy passing time on a coffee break.
    The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance.

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    If it has the cladding panels on that are now being removed from many such buildings, then the property is probably worthless. No one will buy it and if its the case expect and heavy bill from the council for you share of the work. Probably run into tens of thousands. Sorry but that's the risk with ex council high rises.

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    A large bill for cladding is unlikely to be upheld by the courts. See https://www.oxfordmail.co.uk/news/1612096...easonable/ where leaseholders £50K bill was dropped to about £4K. (This did cover more than just cladding (but didn't include the removal of some of the newly installed cladding post Grenfell) but a large proportion of the bill was to put the cladding on).

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    Hi Colin,

    The vague answers you may have bene given are usually due to ‘resaleability’ in the valuer’s opinion.  If the valuer says that it may be difficult to sell due to its nature it is likely to get declined. 

    The other reason is ‘exposure’ where most lenders have a maximum percentage of a block they will lend on of about 25% or 30%.  Some have 50% but unlikely in the block you are describing. 

    That said, the lenders I would potentially start with (depending on the whole application) would be Landbay, Natwest, Platform, Precise, Fleet and Foundation – all of whom will look to lend on ex-council flats up to the fifth floor – but they might not like the total number of floors – you would need to check, or get a broker to do it as they have access to the nitty gritty criteria that you need to hit for them to accept an application.

    I hope that helps,

    Cat

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    Call the PT Broker Hotline on 0333 363 6507 or email us at ptbrokers@johncharcol.co.uk

    Try Halifax. Had this issue back in 2015 with my ex-local flat in Central London. Went through 3 'seasoned' brokers and 5 mortgage applications - all declined.

    As a last ditch attempt I went to Halifax directly and got accepted, but had to put down 40% (Which I think did make a difference).
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