Two houses on one mortgage - is this possible?
Discussion
Afternoon all,
Could do with a bit of mortgage advice from those better informed than I... I have a mortgage on my existing house, but I'm looking to buy another. I do, however, want to keep my existing house - which may (or may not) get rented out in the future (I'll be letting my brother live in it for a while so not a rental property as such).
Therefore, my question is can I combine the equity I have in my existing house and my savings as the deposit on a mortgage to cover two houses? I can easily afford to pay the combined mortgage, even if the 1st house is never rented.
If I decided to rent out the first house in the future, do I have to have a buy-to-let mortgage or can I just keep my repayment mortgage? Do the bank really care how the mortgage gets paid, as long as I can prove that I can afford to pay it every month?
Thanks in advance,
BF.
Could do with a bit of mortgage advice from those better informed than I... I have a mortgage on my existing house, but I'm looking to buy another. I do, however, want to keep my existing house - which may (or may not) get rented out in the future (I'll be letting my brother live in it for a while so not a rental property as such).
Therefore, my question is can I combine the equity I have in my existing house and my savings as the deposit on a mortgage to cover two houses? I can easily afford to pay the combined mortgage, even if the 1st house is never rented.
If I decided to rent out the first house in the future, do I have to have a buy-to-let mortgage or can I just keep my repayment mortgage? Do the bank really care how the mortgage gets paid, as long as I can prove that I can afford to pay it every month?
Thanks in advance,
BF.
Bob Fossil said:
Could do with a bit of mortgage advice from those better informed than I... I have a mortgage on my existing house, but I'm looking to buy another. I do, however, want to keep my existing house - which may (or may not) get rented out in the future (I'll be letting my brother live in it for a while so not a rental property as such).
From a mortgage lenders point of view you will need to be able to service both the mortgage on the old house and the mortgage on the news one.Bob Fossil said:
Therefore, my question is can I combine the equity I have in my existing house and my savings as the deposit on a mortgage to cover two houses? I can easily afford to pay the combined mortgage, even if the 1st house is never rented.
You would need to raise some (all?) of the equity in your current house to give you a deposit on the new house. You would need a seperate mortgage on both properties.
Bob Fossil said:
If I decided to rent out the first house in the future, do I have to have a buy-to-let mortgage or can I just keep my repayment mortgage? Do the bank really care how the mortgage gets paid, as long as I can prove that I can afford to pay it every month?
Yes the lenders care very much how the mortgage gets paid. This is especially true if you have family members living in the property you have vacated. WEhehter they will force you onto a BTL scheme, or simply allow you to carry over the old mortgage will be down to your lenders
The biggest problem you will have is simple disbelief from the lenders. They may take someconvincing that you will not be trying to get a BTL property on a residential mortgage rate.
Oh yeah, and if you aremoving out, make sure your insurers are aware, otherwise they may well void cover in the event of a claim.
Edited by scotal on Monday 15th June 16:52
Thanks to you both for your help - numbers as follows:
Current house - £100k, £80k mortgage left
Proposed house - £200k
Plenty of savings, so will have at least 10% deposit across the total value
Expected income of £475 p/m from rental of current house.
PS - is there a reason why they wouldn't want you renting a house on a residential rate? Is a BTL mortgage more expensive?
Thanks again
Current house - £100k, £80k mortgage left
Proposed house - £200k
Plenty of savings, so will have at least 10% deposit across the total value
Expected income of £475 p/m from rental of current house.
PS - is there a reason why they wouldn't want you renting a house on a residential rate? Is a BTL mortgage more expensive?
Thanks again
You may be able to get a consent to let you first property from your current mortgage provider - as long as you are planning on moving back in. Most lenders will charge for this agreement to be put in place, but how much varies (a lot).
Renting to a memeber of the family can be a headache for tax returns, mortgage finance, insurance, etc, etc. Generally a 'close' family member won't need a consent to let agreement. What constitutes as 'close' also varies though.
If you rent it out properly, and you need finance for it then you really need a BTL mortgage for insurance and liability reasons. They are generally more expensive because you generally only pay the interest off (you can't claim loan reduction against the rental income, only the interest repayments so most people have interest only BTL mortgages). They are also more expensive as there is more risk - if you default on the loan, they have to evict somebody who isn't you and has a legal right to be there.
The rates are worse: you'll be looking at a min of 5.5% - you can get lower rates but they are much more expensive in term loaded fees, or need a much lower LTV.
The LTV is worse: 75% max so you'll need to drop in an extra 5 grand on those numbers above into property 1, 70% isn't much better but 60% opens up some better deals.
The fees are also insane: 2.25% - 3.5% of the loan, so £1,687.50-£2,625 on the above. If you loaded that onto the loan you have just lost a big chunk of the 5k you put in to get down to 75% LTV and will increase the monthly repayments.
The valuation costs are always going up too!
The costs of maintaing property 1 will be about the same as always, you will loose some of the bills, but be liable for them if the property is empty (utilities, council tax, etc). Buildings insurance will probably go up a little. If you rent it out furnished you'll still need contents insurance but it will cost more per £ insured. You may also want landlord liability insurance - just in case somebody does something stupid in your property and sues you.
On the other hand... if you do it right, you should be able to put a few extra quid into your pocket each month. Good luck!
Edit - Those numbers are just what's out there with public banks this morning - really you'll be looking at the stiff end of 5.89% APR for a 75% BTL.
Renting to a memeber of the family can be a headache for tax returns, mortgage finance, insurance, etc, etc. Generally a 'close' family member won't need a consent to let agreement. What constitutes as 'close' also varies though.
If you rent it out properly, and you need finance for it then you really need a BTL mortgage for insurance and liability reasons. They are generally more expensive because you generally only pay the interest off (you can't claim loan reduction against the rental income, only the interest repayments so most people have interest only BTL mortgages). They are also more expensive as there is more risk - if you default on the loan, they have to evict somebody who isn't you and has a legal right to be there.
The rates are worse: you'll be looking at a min of 5.5% - you can get lower rates but they are much more expensive in term loaded fees, or need a much lower LTV.
The LTV is worse: 75% max so you'll need to drop in an extra 5 grand on those numbers above into property 1, 70% isn't much better but 60% opens up some better deals.
The fees are also insane: 2.25% - 3.5% of the loan, so £1,687.50-£2,625 on the above. If you loaded that onto the loan you have just lost a big chunk of the 5k you put in to get down to 75% LTV and will increase the monthly repayments.
The valuation costs are always going up too!
The costs of maintaing property 1 will be about the same as always, you will loose some of the bills, but be liable for them if the property is empty (utilities, council tax, etc). Buildings insurance will probably go up a little. If you rent it out furnished you'll still need contents insurance but it will cost more per £ insured. You may also want landlord liability insurance - just in case somebody does something stupid in your property and sues you.
On the other hand... if you do it right, you should be able to put a few extra quid into your pocket each month. Good luck!
Edit - Those numbers are just what's out there with public banks this morning - really you'll be looking at the stiff end of 5.89% APR for a 75% BTL.
Edited by Simian Dave on Tuesday 16th June 09:00
Simian Dave said:
You may be able to get a consent to let you first property from your current mortgage provider - as long as you are planning on moving back in. Most lenders will charge for this agreement to be put in place, but how much varies (a lot).
If you manage to get the mortage providers consent to let the first property. Are you then able to get a mortgage for the next propety, bearing in mind they are expecting you to move back in?I am asking everyone here, as this does seem to be a bit of a loop hole?
Edited by caz_manc on Tuesday 16th June 13:11
caz_manc said:
Simian Dave said:
You may be able to get a consent to let you first property from your current mortgage provider - as long as you are planning on moving back in. Most lenders will charge for this agreement to be put in place, but how much varies (a lot).
If you manage to get the mortage providers consent to let the first property. Are you then able to get a mortgage for the next propety, bearing in mind they are expecting you to move back in?I am asking everyone here, as this does seem to be a bit of a loop hole?
The problems arise when your now rented property comes up for mortgage renewal (i.e your fixed rate comes to an end or similar.
IF that happens then they will not in the majority of cases allow you to remortgage without you moving to a BTL Mortgage.
Most lenders do not expect you to move back in once they have given consent to let.
Bob Fossil said:
Thanks to you both for your help - numbers as follows:
Current house - £100k, £80k mortgage left
Proposed house - £200k
Plenty of savings, so will have at least 10% deposit across the total value
Expected income of £475 p/m from rental of current house.
PS - is there a reason why they wouldn't want you renting a house on a residential rate? Is a BTL mortgage more expensive?
Thanks again
You are going to have trouble raising a great deal of capital from your current house, especially at a rate anywhere near reasonable. Current house - £100k, £80k mortgage left
Proposed house - £200k
Plenty of savings, so will have at least 10% deposit across the total value
Expected income of £475 p/m from rental of current house.
PS - is there a reason why they wouldn't want you renting a house on a residential rate? Is a BTL mortgage more expensive?
Thanks again
So you are basically going to have to buy the new place with the money you have saved (dont forget to take stamp duty into account as you've crossed the thrshold at 200k.)
Dpeending on your current lender, and their view on rental income, you might be tight on rental ince as well. At 80% you are not going to get a BTL mortgage, so you might have to rejig your finances quite alot.
YES BTL is more expensive. The lenders look at it as a business decision on your part, so nail you to the floor rate wise.
They also claim (with some justification) to be taking more risk on a BTL than they do on a Resi Mortgage.
TBH I would suggest you speak to a decent broker (I know that sounds like an oxymoron, but we are out there)to run through your options in full.
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