Mortgage Question
Discussion
Thought I'd ask this question to all those with mortgage / finance knowledge on PH.
A few years ago we 'bought' our first home. Basically, we don't have a normal mortgage. We paid about 15% of the value of the house using some money we'd saved up. The rest my father gave to us, which we pay back directly to him. Therefore as far as the banks are concerned we own the property outright. So far, so reasonably simple!
We now want to move somewhere larger for which we'll have to take out a 'proper' mortgage. We also want to keep our existing house and let it out.
My question is; can we take out a bank / building society mortgage using the value of the house we 'own outright' as a deposit / collateral?
Any help appreciated.
A few years ago we 'bought' our first home. Basically, we don't have a normal mortgage. We paid about 15% of the value of the house using some money we'd saved up. The rest my father gave to us, which we pay back directly to him. Therefore as far as the banks are concerned we own the property outright. So far, so reasonably simple!
We now want to move somewhere larger for which we'll have to take out a 'proper' mortgage. We also want to keep our existing house and let it out.
My question is; can we take out a bank / building society mortgage using the value of the house we 'own outright' as a deposit / collateral?
Any help appreciated.
No.
You need to release the equity in property one through a mortgage, if renting then a buy to let product.
Then the home you wish to purchase to live in will need a another mortgage.
BTL rates are typically higher than residential mortgages therefore you are probably best only releasing sufficent equity from property 1 to get you the enough of a deposit on property 2 to get the best mortgage deal.
An example (fictitious values and mortgage rates)
property 1 is worth £100k property 2 is worth £200k
You can secure a mortgage on property 2 of £180k (90% LTV) costing 4% or a mortgage of £140k (70% LTV) costing 2%
You can secure a BTL on property at 4.5% and it can be for as little as £20k or as much as £60 at that rate of 4.5%
In this example you would be better of taking £60k out of property 1 so you can secure a lower interest rate on the mortgage for property 2 as this will be an overall net saving.
Having never had a mortgage before you might qualify for some first time buyer products but your best bet is to speak to a mortgage broker.
Your circumstances are slightly out of the ordinary and therefore I would suggest a broker over merely speaking to a bank employee so that you can search the whole market and get the best deal for your circumstances.
You need to release the equity in property one through a mortgage, if renting then a buy to let product.
Then the home you wish to purchase to live in will need a another mortgage.
BTL rates are typically higher than residential mortgages therefore you are probably best only releasing sufficent equity from property 1 to get you the enough of a deposit on property 2 to get the best mortgage deal.
An example (fictitious values and mortgage rates)
property 1 is worth £100k property 2 is worth £200k
You can secure a mortgage on property 2 of £180k (90% LTV) costing 4% or a mortgage of £140k (70% LTV) costing 2%
You can secure a BTL on property at 4.5% and it can be for as little as £20k or as much as £60 at that rate of 4.5%
In this example you would be better of taking £60k out of property 1 so you can secure a lower interest rate on the mortgage for property 2 as this will be an overall net saving.
Having never had a mortgage before you might qualify for some first time buyer products but your best bet is to speak to a mortgage broker.
Your circumstances are slightly out of the ordinary and therefore I would suggest a broker over merely speaking to a bank employee so that you can search the whole market and get the best deal for your circumstances.
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