new property to finance
Discussion
Looking to borrow about £300k to buy a property to rent out. Value of new property is about £300k
Looking to secure the mortgage on our main home which is 90% mortgage free and worth about £750k thus £675k
Paying the mortgage from normal income which can easily afford it. Yes understand the 2nd home tax and associated costs.
Is this likely to be an issue for a mortgage company on the securing the mortgage?
Is it best to just remortgage but will they take umbridge to tell them its for another property? my concern is when they know its for a 2nd property that they will say that they will only give say a 60% of the new property hence why wishing to secure on main home and get the full price ?
- cash poor but asset rich I think is the saying.
Any guidance appreciated.
Looking to secure the mortgage on our main home which is 90% mortgage free and worth about £750k thus £675k
Paying the mortgage from normal income which can easily afford it. Yes understand the 2nd home tax and associated costs.
Is this likely to be an issue for a mortgage company on the securing the mortgage?
Is it best to just remortgage but will they take umbridge to tell them its for another property? my concern is when they know its for a 2nd property that they will say that they will only give say a 60% of the new property hence why wishing to secure on main home and get the full price ?
- cash poor but asset rich I think is the saying.
Any guidance appreciated.
Edited by superlightr on Thursday 5th January 09:38
Edited by superlightr on Thursday 5th January 09:39
Edited by superlightr on Thursday 5th January 09:40
Not sure where or what the questions are? 
Lenders will consider this for you but naturally they will want to know where the money is going and will want details of what the picture will look like when you have bought the new property Eg value, will you be taking a BTL mortgage too, will you be buying outright, rental value etc etc.
Lenders will consider this for you but naturally they will want to know where the money is going and will want details of what the picture will look like when you have bought the new property Eg value, will you be taking a BTL mortgage too, will you be buying outright, rental value etc etc.
Sarnie said:
Not sure where or what the questions are?
Lenders will consider this for you but naturally they will want to know where the money is going and will want details of what the picture will look like when you have bought the new property Eg value, will you be taking a BTL mortgage too, will you be buying outright, rental value etc etc.
apologies not worded it well. Yes to Andy below that's the thought process.Lenders will consider this for you but naturally they will want to know where the money is going and will want details of what the picture will look like when you have bought the new property Eg value, will you be taking a BTL mortgage too, will you be buying outright, rental value etc etc.
andye30m3 said:
I did what you are looking to do. I had my own home which I owned outright.
I then remortgaged to buy a cheaper BTL, because the mortgage was against my home it avoided me needing a more expensive BTL mortgage.
Bank didn't seam to care at all.
yes that's it. Worded it better then I did. That's good to hear. Thank you.I then remortgaged to buy a cheaper BTL, because the mortgage was against my home it avoided me needing a more expensive BTL mortgage.
Bank didn't seam to care at all.
Sarnie said:
Lenders will consider this for you but naturally they will want to know where the money is going ...
I never understood this.Why do they care where the money is going.
When I buy a house - I give the money away to the vendor.
As long as I can afford the mortgage and the LTV is appropriate - why do they care whether I am blowing it on hookers and coke or giving it to charity or giving it to the guy selling me the house.
What business is it of theirs?
Be careful what you tell your lender, many lenders will not allow additional borrowing to buy another property.
They will however lend you the money if you say it is intended for a home improvement, a car, a holiday, a wedding, or pretty much anything else, probably including putting it on a horse on the grand national.
They will however lend you the money if you say it is intended for a home improvement, a car, a holiday, a wedding, or pretty much anything else, probably including putting it on a horse on the grand national.
walm said:
I never understood this.
Why do they care where the money is going.
When I buy a house - I give the money away to the vendor.
As long as I can afford the mortgage and the LTV is appropriate - why do they care whether I am blowing it on hookers and coke or giving it to charity or giving it to the guy selling me the house.
What business is it of theirs?
Risk. How safe is their money?Why do they care where the money is going.
When I buy a house - I give the money away to the vendor.
As long as I can afford the mortgage and the LTV is appropriate - why do they care whether I am blowing it on hookers and coke or giving it to charity or giving it to the guy selling me the house.
What business is it of theirs?
If they lend to you to buy a BTL, how will the clients finances look like after purchase? Is he buying outright or is he buying 10 properties with minimum deposits and take out 10 BTL mortgages. If so, what is the applicant on the hook for if they are all empty. If he has to pay those commitments himself, how will that impact his affordability and therefore the potential for him to fall into arrears on the money they have gave him?
It's called responsible lending, not just for them but for the applicants too.
People always trot out the line...."it's low LTV and they could take the house back if required".........well, lenders are not in the business of repossessing properties, they do not want to do that. It's a lengthy, costly drawn out affair. Yes, they may get their money back but when and at what cost? They want to lend to people who will repay back the loan plus interest, thats where the profit is.
Asking where the money is going is simply due diligence that you'd expect of a responsible lender especially after MMR and more recently MCD. Naturally, the level of due diligence will vary from lender, some will be very stringent (insist on seeing full sales particulars for the BTL before releasing funds) others may simply ask the question as to what the money is being used for........
Sarnie said:
walm said:
I never understood this.
Why do they care where the money is going.
When I buy a house - I give the money away to the vendor.
As long as I can afford the mortgage and the LTV is appropriate - why do they care whether I am blowing it on hookers and coke or giving it to charity or giving it to the guy selling me the house.
What business is it of theirs?
Risk. How safe is their money?Why do they care where the money is going.
When I buy a house - I give the money away to the vendor.
As long as I can afford the mortgage and the LTV is appropriate - why do they care whether I am blowing it on hookers and coke or giving it to charity or giving it to the guy selling me the house.
What business is it of theirs?
If they lend to you to buy a BTL, how will the clients finances look like after purchase? Is he buying outright or is he buying 10 properties with minimum deposits and take out 10 BTL mortgages. If so, what is the applicant on the hook for if they are all empty. If he has to pay those commitments himself, how will that impact his affordability and therefore the potential for him to fall into arrears on the money they have gave him?
It's called responsible lending, not just for them but for the applicants too.
People always trot out the line...."it's low LTV and they could take the house back if required".........well, lenders are not in the business of repossessing properties, they do not want to do that. It's a lengthy, costly drawn out affair. Yes, they may get their money back but when and at what cost? They want to lend to people who will repay back the loan plus interest, thats where the profit is.
Asking where the money is going is simply due diligence that you'd expect of a responsible lender especially after MMR and more recently MCD. Naturally, the level of due diligence will vary from lender, some will be very stringent (insist on seeing full sales particulars for the BTL before releasing funds) others may simply ask the question as to what the money is being used for........
£300k house.
1. FTB with £100k deposit who can easily afford £200k mortgage. Buys house.
2. Remortgage from £100k to £200k on the same house with same affordability. (Blows the £100k MEW on coke.)
The end result for both of these is EXACTLY the same, isn't it?
walm said:
OK two examples, because I must be missing something!
£300k house.
1. FTB with £100k deposit who can easily afford £200k mortgage. Buys house.
2. Remortgage from £100k to £200k on the same house with same affordability. (Blows the £100k MEW on coke.)
The end result for both of these is EXACTLY the same, isn't it?
Same net result but differing reasons for the requested funds......in the second example ends up with £100k of the banks money (not his) in his account.....two totally different transactions, assessed and underwritten entirely differently, even if the net result is the same.£300k house.
1. FTB with £100k deposit who can easily afford £200k mortgage. Buys house.
2. Remortgage from £100k to £200k on the same house with same affordability. (Blows the £100k MEW on coke.)
The end result for both of these is EXACTLY the same, isn't it?
Sarnie said:
walm said:
OK two examples, because I must be missing something!
£300k house.
1. FTB with £100k deposit who can easily afford £200k mortgage. Buys house.
2. Remortgage from £100k to £200k on the same house with same affordability. (Blows the £100k MEW on coke.)
The end result for both of these is EXACTLY the same, isn't it?
Same net result but differing reasons for the requested funds......in the second example ends up with £100k of the banks money (not his) in his account.....two totally different transactions, assessed and underwritten entirely differently, even if the net result is the same.£300k house.
1. FTB with £100k deposit who can easily afford £200k mortgage. Buys house.
2. Remortgage from £100k to £200k on the same house with same affordability. (Blows the £100k MEW on coke.)
The end result for both of these is EXACTLY the same, isn't it?
Who cares how they got there - isn't the end result what matters?
The risk of foreclosure is exactly the same for both!
And frankly, isn't it better if number 2 has some savings rather than number 1 who has given it all to the guy he bought the house off and has ZERO savings!
walm said:
That's what I don't understand.
Who cares how they got there - isn't the end result what matters?
The risk of foreclosure is exactly the same for both!
And frankly, isn't it better if number 2 has some savings rather than number 1 who has given it all to the guy he bought the house off and has ZERO savings!
He wouldn't have savings, he'd have the banks money in his account.......it doesn't matter if the end net result is the same, it's assessed differently.Who cares how they got there - isn't the end result what matters?
The risk of foreclosure is exactly the same for both!
And frankly, isn't it better if number 2 has some savings rather than number 1 who has given it all to the guy he bought the house off and has ZERO savings!
Call your lender up and ask them for £100k for home improvements.........then call them back and ask them for £100k to start a business or pay off a tax bill.............same net result still, but you will certainly get differing responses......
Sarnie said:
walm said:
That's what I don't understand.
Who cares how they got there - isn't the end result what matters?
The risk of foreclosure is exactly the same for both!
And frankly, isn't it better if number 2 has some savings rather than number 1 who has given it all to the guy he bought the house off and has ZERO savings!
He wouldn't have savings, he'd have the banks money in his account.......it doesn't matter if the end net result is the same, it's assessed differently.Who cares how they got there - isn't the end result what matters?
The risk of foreclosure is exactly the same for both!
And frankly, isn't it better if number 2 has some savings rather than number 1 who has given it all to the guy he bought the house off and has ZERO savings!
Call your lender up and ask them for £100k for home improvements.........then call them back and ask them for £100k to start a business or pay off a tax bill.............same net result still, but you will certainly get differing responses......
In one, you are investing in your home so the value should be going up roughly in-line with your spend (if not better, e.g. loft conversion), so the bank knows the EFFECTIVE LTV will improve vs. someone who is just paying a bill.
And number 2 certainly DOES have savings vs. number 1, his balance sheet is completely different since he hasn't yet spent the MEW unlike number 1 who has spent everything.
Number 1 - debt 200, equity 100, savings 0.
Number 2 - debt 200, equity 100, savings 100. (Because he has just come from: debt 100, equity 200, savings 0.)
Once number 2 has blown that MEW money on coke then he just looks exactly like number 1: - debt 200, equity 100, savings 0.
Sarnie said:
.........well, lenders are not in the business of repossessing properties, they do not want to do that. It's a lengthy, costly drawn out affair. Yes, they may get their money back but when and at what cost?
The 12000 recipients of RBS' latest 'putting things right' correspondence from their vile GRG department might not totally agree with you on that one....If you decide to get a buy to let(BTL) property, or even a new mortgage product, the level of questioning has risen greatly as part of the lenders "stress testing" they now employ in that they'll want to know about all of your commitments right down to gym memberships and in the case of a BTL so that if your tenanted property becomes vacant, that you can afford to pay the mortgage and all the other running costs of the BTL until a tenant is found or one defaults etc.
Some lenders are slightly more flexible, although In this instance & with the ever changing products available, I'd suggest speaking with an independent mortgage broker to see if they'll give you some initial advice FOC?
Some lenders are slightly more flexible, although In this instance & with the ever changing products available, I'd suggest speaking with an independent mortgage broker to see if they'll give you some initial advice FOC?
MrC986 said:
If you decide to get a buy to let(BTL) property, or even a new mortgage product, the level of questioning has risen greatly as part of the lenders "stress testing" they now employ in that they'll want to know about all of your commitments right down to gym memberships and in the case of a BTL so that if your tenanted property becomes vacant, that you can afford to pay the mortgage and all the other running costs of the BTL until a tenant is found or one defaults etc.
Some lenders are slightly more flexible, although In this instance & with the ever changing products available, I'd suggest speaking with an independent mortgage broker to see if they'll give you some initial advice FOC?
An independent mortgage broker has already posted advice above, FOC Some lenders are slightly more flexible, although In this instance & with the ever changing products available, I'd suggest speaking with an independent mortgage broker to see if they'll give you some initial advice FOC?
You're missing the vital bit. In 1, the 100k is going into the house equity and is still 'there', and in 2 it's getting spanked on coke and vanishing.
walm said:
Right but that makes sense.
In one, you are investing in your home so the value should be going up roughly in-line with your spend (if not better, e.g. loft conversion), so the bank knows the EFFECTIVE LTV will improve vs. someone who is just paying a bill.
And number 2 certainly DOES have savings vs. number 1, his balance sheet is completely different since he hasn't yet spent the MEW unlike number 1 who has spent everything.
Number 1 - debt 200, equity 200, savings 0.
Number 2 - debt 200, equity 100, savings 100. (Because he has just come from: debt 100, equity 200, savings 0.)
Once number 2 has blown that MEW money on coke then he just looks exactly like number 1: - debt 200, equity 100, savings 0.
In one, you are investing in your home so the value should be going up roughly in-line with your spend (if not better, e.g. loft conversion), so the bank knows the EFFECTIVE LTV will improve vs. someone who is just paying a bill.
And number 2 certainly DOES have savings vs. number 1, his balance sheet is completely different since he hasn't yet spent the MEW unlike number 1 who has spent everything.
Number 1 - debt 200, equity 200, savings 0.
Number 2 - debt 200, equity 100, savings 100. (Because he has just come from: debt 100, equity 200, savings 0.)
Once number 2 has blown that MEW money on coke then he just looks exactly like number 1: - debt 200, equity 100, savings 0.
Mr Noble said:
You're missing the vital bit. In 1, the 100k is going into the house equity and is still 'there', and in 2 it's getting spanked on coke and vanishing.
No, I think you are misunderstanding the scenario a little.walm said:
Right but that makes sense.
In one, you are investing in your home so the value should be going up roughly in-line with your spend (if not better, e.g. loft conversion), so the bank knows the EFFECTIVE LTV will improve vs. someone who is just paying a bill.
And number 2 certainly DOES have savings vs. number 1, his balance sheet is completely different since he hasn't yet spent the MEW unlike number 1 who has spent everything.
Number 1 - debt 200, equity 200, savings 0.
Number 2 - debt 200, equity 100, savings 100. (Because he has just come from: debt 100, equity 200, savings 0.)
Once number 2 has blown that MEW money on coke then he just looks exactly like number 1: - debt 200, equity 100, savings 0.
In one, you are investing in your home so the value should be going up roughly in-line with your spend (if not better, e.g. loft conversion), so the bank knows the EFFECTIVE LTV will improve vs. someone who is just paying a bill.
And number 2 certainly DOES have savings vs. number 1, his balance sheet is completely different since he hasn't yet spent the MEW unlike number 1 who has spent everything.
Number 1 - debt 200, equity 200, savings 0.
Number 2 - debt 200, equity 100, savings 100. (Because he has just come from: debt 100, equity 200, savings 0.)
Once number 2 has blown that MEW money on coke then he just looks exactly like number 1: - debt 200, equity 100, savings 0.
I was still talking about the first scenario where the house is only worth 300k.
Sarnie replied that banks prefer lending for home improvement than for coke/hookers. Which I agreed with because - YES - the house would be worth 400k after the improvements.
So your edit absolutely makes sense there - I 100% agree.
But forget home improvements, my point still stands, SURELY the OUTCOME is what matters in the OP's case and in the case of anyone borrowing money.
300k house.
1. Debt 200k, equity 100k (a new buyer or remortgage on same LTV).
2. Debt 200k, equity 100k... up from Debt 100k, equity 200k (mortagage equity withdrawal for coke/hookers).
Both 1 & 2 earn the same with the same outgoings. Same LTV. What's the difference?
(Perhaps the 100k coke/hooker blow-out is a cause for concern and hence the outgoings aren't really the same... but surely BTL investment or just shifting that money into say an ISA or SIPP or something wouldn't be a concern?)
walm said:
No, I think you are misunderstanding the scenario a little.
I was still talking about the first scenario where the house is only worth 300k.
Sarnie replied that banks prefer lending for home improvement than for coke/hookers. Which I agreed with because - YES - the house would be worth 400k after the improvements.
So your edit absolutely makes sense there - I 100% agree.
But forget home improvements, my point still stands, SURELY the OUTCOME is what matters in the OP's case and in the case of anyone borrowing money.
300k house.
1. Debt 200k, equity 100k (a new buyer or remortgage on same LTV).
2. Debt 200k, equity 100k... up from Debt 100k, equity 200k (mortagage equity withdrawal for coke/hookers).
Both 1 & 2 earn the same with the same outgoings. Same LTV. What's the difference?
(Perhaps the 100k coke/hooker blow-out is a cause for concern and hence the outgoings aren't really the same... but surely BTL investment or just shifting that money into say an ISA or SIPP or something wouldn't be a concern?)
If it's a safe, low risk use of the additional credit they probably wouldn't have an issue with it as, like you say, it doesn't make a difference to the risk profile of the property or debtor.I was still talking about the first scenario where the house is only worth 300k.
Sarnie replied that banks prefer lending for home improvement than for coke/hookers. Which I agreed with because - YES - the house would be worth 400k after the improvements.
So your edit absolutely makes sense there - I 100% agree.
But forget home improvements, my point still stands, SURELY the OUTCOME is what matters in the OP's case and in the case of anyone borrowing money.
300k house.
1. Debt 200k, equity 100k (a new buyer or remortgage on same LTV).
2. Debt 200k, equity 100k... up from Debt 100k, equity 200k (mortagage equity withdrawal for coke/hookers).
Both 1 & 2 earn the same with the same outgoings. Same LTV. What's the difference?
(Perhaps the 100k coke/hooker blow-out is a cause for concern and hence the outgoings aren't really the same... but surely BTL investment or just shifting that money into say an ISA or SIPP or something wouldn't be a concern?)
But if the bank notices risky behaviour, e.g. that you are going to use the money for a new business, are more likely to soon lose your job or get divorced (£100k of coke/prostitutes) or whatever, then they can forecast greater chance of default in the future. Even though both 1 & 2 are currently the same on paper, they can use these qualitative factors to better assess future probability of default - which risky behaviour with the £100k capital would certainly indicate.
You may also notice that some lenders have issue with people using funds for home improvement, the reason being that it changes the risk profile of the property, home improvements and extensions can go wrong, and a £500k home with it's roof off, halfway through an extension is a far worse property to have your £400k loan secured against than a £500k vanilla home ready to sell tomorrow.
sealtt said:
If a safe, low risk use of the additional credit they probably wouldn't have an issue with it.
But if the bank notices risky behaviour, e.g. that you are going to use the money for a new business, are more likely to soon lose your job or get divorced (£100k of coke/prostitutes) or whatever, then they can forecast greater chance of default in the future. Even though both 1 & 2 are currently the same on paper, they can use these qualitative factors to better assess future probability of default - which risky behaviour with the £100k capital would certainly indicate.
OK got it. I guess I never thought the underwriters used much common sense like that and were more of the "computer says no" types!But if the bank notices risky behaviour, e.g. that you are going to use the money for a new business, are more likely to soon lose your job or get divorced (£100k of coke/prostitutes) or whatever, then they can forecast greater chance of default in the future. Even though both 1 & 2 are currently the same on paper, they can use these qualitative factors to better assess future probability of default - which risky behaviour with the £100k capital would certainly indicate.
That actually does make a lot of sense.
Thanks.
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