Mortgage Top up to purchase house, when letting own house

[NeilPot]

Just a quick one.

Looking to buy with my partner. We each own individually:
House 1: Mortgaged / £250k on £450k -> This house will be sold
House 2: Mortgaged / £200k on £375k -> This house will be let

Then
Purchase House 3: £625k -> £650k
- Use Equity / Mortgage from House 1 (£450k), Plus Interest only mortgage (£200k / £500 per month)
Still own House 2, use rental income to cover Mortgage.

Is this realistic assuming salaries cover lenders criteria?

House 2 has a 3 month Mortgage port time (vs House 1 = 6 months), and if we loose either we then have Redemption penalties / higher interest rates for another mortgage, hence thinking to let house 2.

Saying that, we could Sell House 2 also, and use the equity (£375k - outstanding mortgage) to purchase House 3 and end up with one property (Stamp Duty / Costs etc covered.)

[OutInTheShed]

Will the mortgage on house 2 permit letting?

Speak to a broker.
Last time I had mortgage questions, I found there were a lot of variables and even people's fairly recent experiences could be obsolete, as lenders change their criteria when they feel like it.

[NeilPot]

Thanks for the reply.

Barclays will allow the Mortgage on House 2 to be converted to 'Buy to Let', or used to let out. They need to be informed then allow the change, lasts for 1 or 2 years, then apply again.

[Killer2005]

Sarnie is your man.

[Kickstart]

In terms of your plan I would check it works comfortably at 5% mortgage interest rates
Good luck

[NeilPot]

We both have 4 yrs to run on our 5 year fixed mortgages, hence not wanting to lose these.

The added interest only portion is costed at today’s interest, again fixed.

But a good point raised, what to do if the interest rates stay high and we both exit our mortgages / monthly increases.

We’d have an option to sell house 2 in interest rates didn’t work for us. But for now we are both on 5 years fixed.

[Countdown]

NeilPot said:

Just a quick one.

Looking to buy with my partner. We each own individually:
House 1: Mortgaged / £250k on £450k -> This house will be sold
House 2: Mortgaged / £200k on £375k -> This house will be let

Then
Purchase House 3: £625k -> £650k
- Use Equity / Mortgage from House 1 (£450k), Plus Interest only mortgage (£200k / £500 per month)
Still own House 2, use rental income to cover Mortgage.

is the outstanding mortgage on House 1 £250k? if so then when you sell for £450k you'll get £200k equity. So You'll need a £450k mortgage for House 3 (not £200k).

Apologies if Ive misunderstood?

[Abacus21]

OutInTheShed said:

Will the mortgage on house 2 permit letting?

Speak to a broker.
Last time I had mortgage questions, I found there were a lot of variables and even people's fairly recent experiences could be obsolete, as lenders change their criteria when they feel like it.

How would mortgage company find out if the house was let ? Wouldnt they just be interested mortgage repayments we being maintained?

[dmahon]

Abacus21 said:

How would mortgage company find out if the house was let ? Wouldnt they just be interested mortgage repayments we being maintained?

Quite easily if they went looking - electoral roll or credit reference agencies. It probably wouldn’t be that hard for them to monitor for such changes automatically.

And what if something happens to the property such as a fire which you weren’t insured for, or a bad debt or eviction scenario if you have rogue tenants. Messy if you aren’t supposed to let it out.

If they found out they could theoretically recall the loan leaving up the creek. I imagine this would also cause problems with future borrowing.

I’m not much of a rule follower, but don’t think I’d mess around with an X00k asset belonging to the bank.