Can you apply for a mortgage to repay a director's loan used to secure a house?

[mickael28]

Hi guys,

We've seen a house at an auction and I was reading that you need to secure financing pretty quick after the auction end, which sometimes is not so easy with a standard mortgage, so I was thinking that with a contractor mortgage would be even more difficult.

We've got funds on the company (after CT) that I think we could temporarily used as a director's loan, however, if you get a loan from the company and pay the house in full, can you then somehow apply for a mortgage for that same house, so that you can repay the loan to the limited company after one or two months?

Thank you!

[TykeMerc]

There's nothing to stop you applying for a mortgage on a property you already own. How likely it is that you get what you want is another matter of course.

Quite a few of the contractor mortgage questions posted on here are about re-mortgaging and what you've asked about isn't much different.

[northernladuk]

Erm, should you really be buggering about with loans for the company if you can't answer that last question??? Why are you going auction hunting when you don't appear to know all that much about mortgages?

What happens if you buy a ringer and the remortgage won't cover your company loan? Sounds like a real bad idea to me. Don't use company money to prop up your personal problems IMO.

I'd speak to Freelance Financials about contractor mortgages. I've had two and both came back quicker than my bog standard BTL... Saying that I don't know if BTL's are longer than standard ones.

If you are serious about doing this see if Freelance Financials can get all your data collection and everything up to the final point ready before you go in to auction and then just kick the last bit off after you buy it. Ask them how long that will be.

[Martin@AS Financial]

Hi guys,

We've seen a house at an auction and I was reading that you need to secure financing pretty quick after the auction end, which sometimes is not so easy with a standard mortgage, so I was thinking that with a contractor mortgage would be even more difficult.

We've got funds on the company (after CT) that I think we could temporarily used as a director's loan, however, if you get a loan from the company and pay the house in full, can you then somehow apply for a mortgage for that same house, so that you can repay the loan to the limited company after one or two months?

Thank you!

Buying at auction can prove to be quite problematic but I have seen it done successfully.

If your bid at auction is successful then you will normally be expected to pay an immediate non-refundable deposit of 10% of the purchase price. If you have not previously arranged the mortgage up front then you are parting with a lot of money without ensuring that (i) you will be acceptable to the lender and (ii) that the property will be acceptable to the lender. You would therefore pay your deposit, subsequently apply for the mortgage and you could then hit problems.

The alternative to this would be to arrange the mortgage in advance. Most auction houses will typically allow a small window of viewing time prior to the auction where you could arrange for the mortgage company’s surveyor to visit the property to ensure that it will be acceptable security. However, you should note that the vast majority of lenders charge for their mortgage valuations and therefore you would incur costs without knowing whether or not you will secure the property. Better this though than exchange on a property that is is not suitable for a mortgage.

If you do go down your own proposed route, I would advise a note of caution. As part of anti money laundering, most lenders (not all) do not allow next day remortgages and typically require that the property has been owned for 3-6 months. Secondly, mortgage lenders do not like money to be raised for "business purposes" and repaying a directors loan may fall into this catogory.