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Use another house as mortgage collateral?
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# 1
Old 29-05-2010, 10:09 AM
MoneySaving Newbie
Join Date: Sep 2008
Location: Manchester
Posts: 13
Default Use another house as mortgage collateral?

I wonder if anyone could help.

My wife and I own a mortgaged property work approx 100k we are trying to sell; both have good stable jobs so no issues getting a new mortgage.

We also have a mortgage-free flat worth approx 70k which we have been trying to sell. Selling it would give us a great deposit towards our next house. However we are having difficulty selling it, especially as other properties have come on for sale at lower prices. I don't need advice on 'well lower your price etc' as that is not my point.

I want to know if we can sell property A, taking a 5% despoit with us towards the new house, and somewhow tell the mortgage company about property B being a 70k-ish asset - gaining a better rate/mortgage based on this asset?

In business terms I know there are instances of using a property as collateral - anyone advise on the situation in the residential market?
Thanks in advance,
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# 2
Old 29-05-2010, 10:14 AM
Fantastically Fervent MoneySaving Super Fan
Join Date: Jun 2009
Location: The North
Posts: 7,999

No, I wouldn't have thought so.

Mortgage rates reflect the particular risk against a single asset (since most people only have one).

You could certainly use the income rental (if you had any) against lending criteria from the mortgage but there is not a way you can use any of this 70k value from the flat unless you liquidate it and invest in your new house.

Not ideal but it seems that you will simply have to wait until it sells, unless the 70k does not significantly change your LTV on your new house? If you are already going to be at 75% LTV you should have a good range of mortgages available to you and you should look for something flexible that will allow you to then invest the 70k penalty free when your flat does sell. If you would be buying at 90% without the proceeds of the flat then you have little choice but to wait if you want to secure a good deal.

The problem with principles is sometimes they serve no purpose other than to make the holder of said principle righteously indignant. Righteous indignation doesn't get you a refund for your item, but I guess it allows you the opportunity to chunter away on the internet. Fluffnutter
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# 3
Old 29-05-2010, 10:15 AM
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Join Date: Jan 2006
Location: Hampshire
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You can't use it as 'collateral' as such - you need the actual money in hand
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# 4
Old 29-05-2010, 10:18 AM
MoneySaving Newbie
Join Date: Sep 2008
Location: Manchester
Posts: 13

Thanks peeps

We have options of:
-waiting (feel like i've been waiting forever)
-reducing the price (not ideal)
-buying a new build and exchanging the 70k place in return
-selling to a '75%' value place

But obviously none of them are first choices. Anyone know anything more than these good guys?
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# 5
Old 31-05-2010, 9:20 PM
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just reduce the price. If it isn't selling, this will be why. Especially as you say others coming on for less. Easier and simpler!
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