Mortgage on second property for self employed?

[Aerate]

Wife and I are self-employed. I am an exhibitions contractor, she teaches yoga. We have about £5k to pay off on the mortgage for our £400k house. We would like to buy another house nearby that is going for £320k. How can we get a mortgage? Should we renegotiate our current mortgage or should we pay it off and use our house as security on the new mortgage (which we don't have a huge deposit for)?

[Aerate]

We would like to move into the second house as it is within walking distance of the boys school.

[Aerate]

Sorry - I really should have given you the full picture. We would let out our current house hopefully realising £1800 PCM.