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Take out mortgage on my own house to buy another property?
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# 1
somekindofwizard
Old 11-01-2009, 8:35 PM
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Default Take out mortgage on my own house to buy another property?

I'm fairly ignorant on the ins and outs of mortgages, so would really appreciate any advice about my current situation.

I own my home without a mortgage, and it's worth around 150k. I want to get a mortgage of about 85k to buy a buy-to-let property as an investment.

However, I'd be letting out the new property on a 3 year lease, so no lenders will even consider giving me a buy-to-let mortgage because they insist on a 6 month maximum lease.

So, would it be possible to take out an 85k mortgage on my own home to buy the investment property with cash? Would the lender ask questions about what I want to do with the money, and turn me down when they find out why?

One more complication - I'm self-employed so would struggle to prove my income. Could I add my girlfriend to my property's deeds, do a joint application and get a multiple of her steady salary?

Many thanks in advance for any help!
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# 2
silvercar
Old 11-01-2009, 10:45 PM
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Quote:
So, would it be possible to take out an 85k mortgage on my own home to buy the investment property with cash?
Yes, if your income and credit rating can justify that mortgage.

Quote:
Would the lender ask questions about what I want to do with the money, and turn me down when they find out why?
Shouldn't be a big issue; they have your home as security.

Quote:
One more complication - I'm self-employed so would struggle to prove my income. Could I add my girlfriend to my property's deeds, do a joint application and get a multiple of her steady salary?
Yes, though only you know the risk of giving your girlfriend half your property.
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# 3
socrates
Old 11-01-2009, 11:53 PM
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This question keeps coming up and unless someone can prove otherwise the minute you tell your lender its to buy another property you will be rejected.

I disagree with anyone who says they will have your home as security - you are looking to borrow money for a BTL at residential mortgage rates which are far lower than BTL rates.

Unless you lie and like I have said in answer to previous such posts that is mortgage fraud and I do not condone that - probably why the mortgage industry is in the shape it is in at the moment
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# 4
rl290
Old 12-01-2009, 12:21 AM
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If you were to get a mortgage on the actual BTL property, you would then be able to offset mortgage interest against tax. If, as you suggest, you were to take out the mortgage on your own home I believe that you could not do this... which is a big loss.

I, personally, would just wait for mortgages to become more available and at lower interest rates. This should loosely coincide with the bottom of the market (or, it would certainly be closer to the bottom than we are now).

R
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# 5
maninthestreet
Old 12-01-2009, 7:43 AM
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Do you really want to risk your own home like this? There are many BTLers who have done the same as you and have lost their home as a result.
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# 6
TheGreatBear
Old 12-01-2009, 9:00 AM
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Quote:
Originally Posted by socrates View Post
This question keeps coming up and unless someone can prove otherwise the minute you tell your lender its to buy another property you will be rejected.

I disagree with anyone who says they will have your home as security - you are looking to borrow money for a BTL at residential mortgage rates which are far lower than BTL rates.

Unless you lie and like I have said in answer to previous such posts that is mortgage fraud and I do not condone that - probably why the mortgage industry is in the shape it is in at the moment

This is not true. You are well within your rights to release capital from your existing property, in order to purchase an investment property. As long as you can afford the repayments, via your income, and you are upfront with the lender about the purpose of the capital then they will have no problem.

Not sure where you got this information from Socrates!:confused:

Regards
I am a mortgage advisor
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# 7
herbiesjp
Old 12-01-2009, 9:02 AM
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What you want to do is fairly straight forward.

Raising funds from your unencumbered property to purchase another property - totally acceptable from a lenders perspectice

The only issue you might have is verifying your income by the sounds of it. I'm sure you will be abel to find some kind of income verification that a lender would be happy - tax returns, accounts, bank statements, invoices etc etc.

Adding your partner will make it easier, by her providing payslips, but then you have to decide if that is a step you want to take.
I am a Mortgage Adviser

You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

Last edited by herbiesjp; 12-01-2009 at 9:04 AM.
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# 8
maninthestreet
Old 12-01-2009, 10:36 AM
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Originally Posted by TheGreatBear View Post
This is not true. You are well within your rights to release capital from your existing property, in order to purchase an investment property. As long as you can afford the repayments, via your income, and you are upfront with the lender about the purpose of the capital then they will have no problem.

Not sure where you got this information from Socrates!:confused:

Regards
There is no right to a mortgage.
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# 9
socrates
Old 12-01-2009, 10:54 AM
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Quote: This is not true. You are well within your rights to release capital from your existing property, in order to purchase an investment property. As long as you can afford the repayments, via your income, and you are upfront with the lender about the purpose of the capital then they will have no problem.

Not sure where you got this information from Socrates!:confused:

Regards

So basically you are saying that someone approaches their lender on a mortgage free property asks them to release funds from it at residential mortgage rates and tells them they are releasing those funds for the purpose of buying another property i.e BTL - but not pay interest rates that apply to BTL mortgages.

In the current climate I do not think so.

Interested to know which lender will accept this. So perhaps you can update my obviously out of date information with the specific lenders in question.
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# 10
herbiesjp
Old 12-01-2009, 10:57 AM
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You can indeed re-mortgage your unencumbered property, to raise funds to buy a BTL.

As long as your income can support the mortgage and you fit the LTV requirements of the deal it is fine.

Most lenders are happy with capital raising, as long as it is for legal purposes, and BTL does fit into a legal purpose.
I am a Mortgage Adviser

You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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# 11
TheGreatBear
Old 12-01-2009, 10:59 AM
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Quote:
Originally Posted by maninthestreet View Post
There is no right to a mortgage.
jog on!
I am a mortgage advisor
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# 12
TheGreatBear
Old 12-01-2009, 11:09 AM
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Quote:
Originally Posted by socrates View Post
Quote: This is not true. You are well within your rights to release capital from your existing property, in order to purchase an investment property. As long as you can afford the repayments, via your income, and you are upfront with the lender about the purpose of the capital then they will have no problem.

Not sure where you got this information from Socrates!:confused:

Regards

So basically you are saying that someone approaches their lender on a mortgage free property asks them to release funds from it at residential mortgage rates and tells them they are releasing those funds for the purpose of buying another property i.e BTL - but not pay interest rates that apply to BTL mortgages.

In the current climate I do not think so.

Interested to know which lender will accept this. So perhaps you can update my obviously out of date information with the specific lenders in question.

70% of lenders will accept this form of lending - as an example though, Lloyds TSB Scotland. The reason why lenders impose higher rates on investment properties, is because they pose a higher risk to the lender, in that an applicant is more likely to default on an investment property as opposed to his main residence. So, even though the client will be raising funds to purchase an investment property the lender will still have a charge against the primary residence, and so reducing the risk to the lender.

There are some lenders who will not view it this way, but the majority will.

Regards
I am a mortgage advisor
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# 13
socrates
Old 12-01-2009, 11:12 AM
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I will call Lloyds TSB now to confirm this as I require a similar mortgage for a similar purchase myself and the lenders I have spoken to so far will not entertain it
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# 14
silvercar
Old 12-01-2009, 11:47 AM
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Originally Posted by rl290 View Post
If you were to get a mortgage on the actual BTL property, you would then be able to offset mortgage interest against tax. If, as you suggest, you were to take out the mortgage on your own home I believe that you could not do this... which is a big loss.

I, personally, would just wait for mortgages to become more available and at lower interest rates. This should loosely coincide with the bottom of the market (or, it would certainly be closer to the bottom than we are now).

R
The mortgage can be secured anywhere, it is still an expense of the rental business and there is no requirement that it is secured on the rental property. (In fact, there is no requirement that it is secured full stop.)

Many people (in the hey day of BTL) would raise the deposit for the BTL by increasing the mortgage on their residential home. This increase and the BTL mortgage would be allowable expenses as they were wholly and exclusively sought to fund the BTL.
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# 15
TheGreatBear
Old 12-01-2009, 12:02 PM
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Quote:
Originally Posted by socrates View Post
I will call Lloyds TSB now to confirm this as I require a similar mortgage for a similar purchase myself and the lenders I have spoken to so far will not entertain it
let us know how you get on - just a quick note: it was Lloyds TSB Scotland I spoke to, who are very different to lloyds TSB, with regard to criteria.

Regards
I am a mortgage advisor
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