New Build Part Exchange
Posted on 18 April 2012 by Martin
I have a NRAM (Together Mortgage) with Mortgage of £70391 and unsecured loan of £15676 payments broken down into £395.60 and £88.10 respectively, the mortgage is in my own name and the property unfortunately has fell into negative equity with predicted value of around £65k could be little more. We have 2 bedroom house and we are looking to move for larger home due to the arrival of a new baby. At first we wanted to rent but supposedly Northern Rock reject the majority of permission to let applications. Our next thought was to approach new build to see if they would go with a part exchange, more so as we are aware some of the part exchange deals have scope in them to offer more for your existing property by increasing the amount you pay for the new one. i.e. house value is £160,000 they have them discounted to sell at say £120,000 (not actual figures) and we have been told they could offer closer to what we need if we went with one of these new builds. Do you firstly know if this is correct process or if it happens? Additionally our other thought is to hold tight and pay more into our mortgage if we did this could we pay the money off the mortgage opposed to the actual unsecured loan? Is there any advice that can be offered for NRAM customers? Also are there companies that still offer 95% or even 90% mortgages for let to buy properties. We have good amount of disposable income each month, but feel very stuck with NRAM and they are far from accommodating.
Let's deal with the part exchange scenario first. I have not personally heard of this "scam" and I do no think that it would work. If a developer is selling houses/flats at a discount to value there is always a reason for this, usually the value is artificially high and the discounted price reflects what people will actually agree to pay.. If you then agree to purchase at a price above the going rate and apply for a mortgage, the bank's valuer will come back with a valuation reflecting previous sales and the amount of your mortgage will be reduced to reflect this lower figure. You would then be left needing a larger deposit which you could have used to reduce the negative equity in the first place.
NRAM will not let you let the property on a permanent basis unless your debt is under 70% LTV, however they will consider a temporary permission to let for periods up to a year at a time. There is a £100 administration fee charged at the outset and every time you ask to renew permission. As each case is considered on it's merits I'm afraid I can not say if you would be successful or not but it is worth speaking to their Customer Helpline 0845 609 9610.
With regards to making overpayments, it is possible to direct these to your mortgage. Following receipt of an overpayment, your outstanding balance and the interest charged will be recalculated. If you pay by Direct Debit and the overpayment is £500 or more your monthly payment will be changed automatically. You have the option to leave your monthly payment unchanged, which will have the effect of setting up a regular overpayment and further reduce your outstanding mortgage balance. To arrange this you would need to contact NRAM.
Finally, if you wish to remortgage your existing property and let it out the maximum LTV you will be able to obtain will be 85%, however it is far more likely that you would find yourself limited to 75% - 80% LTV.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
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