February 23 2019 21:30:14
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PersonalGetting a mortgage was fun and games for the coach house...

Before searching for a house, I decided to get an agreement in principle for a home costing 140,000 GBP with a 25% deposit. My rationale was that this would be the upper price limit of a home for me and I could use it to show the seller that I was serious. With my savings and credit history, I sailed through the application. However, upon finding the coach house, I needed to revise my application as the value of the property was higher...

The problem arose when I discovered it would actually be quite hard to get a mortgage for the coach house. The lender I chose initially (The One Account) declined my revision as they did not want to issue a mortgage this type of property. The reason being that I own the land (freehold), but two of the three garages are leased out to other people living on the site for a "peppercorn" per year. I still don't know the value of the peppercorn (it could actually, legally, be a peppercorn for all I know, but usually it'll be a fair amount to go towards the building insurance). For whatever reason, this was a situation that the lender was not comfortable with.

I made several more phone calls, but most lenders I spoke with said they would not be able to lend for such a property. I decided to withdraw my offer for the coach house as it seemed the only lenders that would lend against the coach house didn't have favourable rates. No later than 30 minutes after doing so, I received a call from the development manager saying he would put me in touch with the mortgage broker that usually deals with properties on the site to see if something could be arranged. An hour later I received a phone call from the broker and was informed that my wording is what was causing me issues. I was telling lenders that it was a "freehold apartment over garages", something that they apparently don't like to hear. It's hard to get a mortgage on a freehold apartment. Instead, he agreed to submit my application for me to Santander (he gets his commission that way) and called it a "Coach House". My application went through successfully and now I'm waiting for the paperwork.

Initially, the broker suggested I ask for the 5% discount to be discounted from the price of the property, however, by getting it as a "gifted deposit", I was able to get my Loan To Value (LTV) ratio down to 70%. This means that for the 3 year tracker mortgage that I've applied for, I'll pay 2.17% over Bank of England rates. Had I gone for the discount and a 75% LTV, I'd be paying 2.69% over Bank of England rates! Something to take into consideration if anyone reading this is in a similar position.

I'm now waiting for the paperwork to come through...

Next step: Finding a solicitor!
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