mortage advice please

[desperado]

I am looking to venture into property development and escape my job for reasons I wont go into. I have cash of £120,000 which is equity from my house im selling. I would like to buy a house to develop but also live in at the same time. Im looking at property in the £130,000-£150,000 price bracket. Obviously this means I will need to borrow extra to meet the difference and also some more for development. I am looking to do the development on a full time basis and keep a small chunk back from the equity to live on while developing.

My query is do i need to look at mortgages or a business loan for this?
Im assuming that a mortgage lender would look at the fact Im not going to be earning a living with a stable job but my argument is I will have put funds aside to pay cover the mortgage untill I sell the property.

Is this feasible?

Hope I have made some sense??

[desperado]

Pretty please??

[IFA]

Hi there, you are right that mortgage lenders will be unhappy with this generally but I have a couple of questions......

Are you currently employed or self-employed?

How much do you foresee needing to borrow in total in addition to your £120k deposit?

How long do you foresee the renovations taking?

How much profit would you expect to make?

[desperado]

Are you currently employed or self-employed?
Employed

How much do you foresee needing to borrow in total in addition to your £120k deposit?
No more than £60,000 maybe less depending on house I purchase price.

How long do you foresee the renovations taking?
Between 3-6months depending on what work is required

How much profit would you expect to make?[/quote]
Ideally £20,000 minimum.

[desperado]

anyone else?

[IFA]

Hi Desperado,

Sorry but I didn't notice your reply on the 24th.

Ideally a mortgage lender will want to know that you are in stable employment but all employment is unstable to a varying degree. As you are employed it is very clear cut whether you are in paid work or not, your situation would be easier if you were self employed currently.

Keep in mind though that once a mortgage has been granted and you have purchased a property with it all sorts of things may affect your employment position, but the lender will not ask you to leave the property and hand back the keys all the time the payments are being met.

If you have plans to leave your employment shortly after purchasing then it would be dishonest not to inform the lender of this and if you told them then the mortgage would not be approved (lender's have never been happy with the concept of lending funds which are then to be used to make the repayments on the loan itself), but if you planned to stay in employment and something unforeseen happened to cause a change of plan shortly after completion then there would be nothing that the lender could do about that so long as you continue to pay, in fact the lender is unlikely to know whether you were working or not as long as they are getting their monthly payment.

If you got through the process of buying, renovating and re-selling your first property then you will have a greater difficulty in purchasing for the second time because you will have had several months of unemployment, and although at that point you could be officially classed as a self-employed property developer you would have no trading accounts to quantify your income.

The best thing you can do is find a good local mortgage broker (ask around for recommendations), preferably someone who deals in commercial as well as residential loans, and talk it through in great detail.

The fact that you are borrowing around 50% of the purchase price is your main advantage, and there is probably a solution for you, but you really need to discuss it with someone face to face.

Hope that helps.