Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • *Rainbow*Warrior*
    • By *Rainbow*Warrior* 15th Jun 17, 8:51 PM
    • 330Posts
    • 64Thanks
    *Rainbow*Warrior*
    Will mortgage amount reflect equity in second property?
    • #1
    • 15th Jun 17, 8:51 PM
    Will mortgage amount reflect equity in second property? 15th Jun 17 at 8:51 PM
    Not sure if I've worded the heading correctly.

    We have a property we live in - which is mortgaged. My parents recently passed on so now I have their property, too - no mortgage.

    I want to move, so initially thought I would have to sell my house and my parents' house, combine the funds and buy something new.

    BUT I'm having a hard time parting with my parents' home... having a hard time doing anything with it at the moment, to be honest. One option in my mind is to rent it out so that we keep the equity in the property but still make some money on it short term.

    So, if and when we want to move and apply for a new mortgage, how will my parents' house be taken into account? Will the mortgage company accept the property value / rental income as something to increase the amount we can borrow against a new property - or do I actually have to sell it in order for them to take the money into account?
Page 1
    • ViolaLass
    • By ViolaLass 15th Jun 17, 8:55 PM
    • 4,953 Posts
    • 6,808 Thanks
    ViolaLass
    • #2
    • 15th Jun 17, 8:55 PM
    • #2
    • 15th Jun 17, 8:55 PM
    You would have to take a mortgage out on your parents house and use the cash as a deposit for the new house.
    • *Rainbow*Warrior*
    • By *Rainbow*Warrior* 15th Jun 17, 8:57 PM
    • 330 Posts
    • 64 Thanks
    *Rainbow*Warrior*
    • #3
    • 15th Jun 17, 8:57 PM
    • #3
    • 15th Jun 17, 8:57 PM
    Surely that wouldn't work though? I mean, I assume we wouldn't qualify for a mortgage on 2 properties at once.

    I should also say we do have equity in our current house... but as things stand I assume we would only be able to borrow roughly the same amount as we have on this current property - meaning we could only buy a property worth about the same as this one. I want to borrow a bit more so I can get somewhere nicer.
    • Thrugelmir
    • By Thrugelmir 15th Jun 17, 9:21 PM
    • 53,798 Posts
    • 46,576 Thanks
    Thrugelmir
    • #4
    • 15th Jun 17, 9:21 PM
    • #4
    • 15th Jun 17, 9:21 PM
    Rental income could be factored into account. When applying for the new mortgage.

    If you don't intend living in your parents old house. Then for what purpose is it worth hanging onto. Plenty of ways you could use part of the inheritance you've received to have an everlasting memory.

    Owning two properties will incur additional stamp duty. Which depending on the purchase price might be a significant sum.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • AnotherJoe
    • By AnotherJoe 15th Jun 17, 9:28 PM
    • 6,544 Posts
    • 6,971 Thanks
    AnotherJoe
    • #5
    • 15th Jun 17, 9:28 PM
    • #5
    • 15th Jun 17, 9:28 PM
    If you are going to have problems selling your parents house how will you cope when there are demanding tenants in there messing the place up, or wanting changes, or the awful paint changing, or whatever?

    Are you aware of the law and tax treatment of rental houses? Are you cut out to be a landlord?

    Did your parents intend this house to be an albatross round your neck or would they have had their heads screwed on and regarded it as the best way to enable you to buy the house you wanted rather than forced to become a landlord ?
    • *Rainbow*Warrior*
    • By *Rainbow*Warrior* 15th Jun 17, 9:48 PM
    • 330 Posts
    • 64 Thanks
    *Rainbow*Warrior*
    • #6
    • 15th Jun 17, 9:48 PM
    • #6
    • 15th Jun 17, 9:48 PM
    AnotherJoe... good points, but I'm still deciding what to do.

    Yes, I'm having a hard time dealing with getting the property emptied, and decorated... and I suppose you may be right about the landlord bit. I would expect my hubby to look after that side of things. He knows more about it than I do (though we've never had a property to rent before, he used to work in the council dealing with tenants so he does know how demanding and unreasonable they can be). He also knows a bit about the law surrounding tenancies - but in any case it's not like we would be going into it blind, we would do the research and look into letting agencies etc.

    I'm not saying this is the ideal solution, it's just the option I'm looking at right now. I would also hope that the tenants would be nice. I know there's no guarantee of that, but why assume they won't be? We have friends who are landlords and they seem to manage ok.

    The thing is, apart from the emotional upheaval of selling... it's in the back of my mind that I would like to hold on to the property if at all possible so that my kids will have something in the future. Yes, I know there are lots of arguments against that, but I'm looking at my gut feeling and right now there is a lot of talk of people not being able to get on the property ladder at all, so if I can help then that's good.

    Also... I think I have 2 pretty sound financial reasons for not selling. First, we are not ready to sell our own house yet. I'm worried that if we sell my parents' house the money will end up getting reduced, frittered away. At least if I keep the house then I keep the equity.

    Also, as a general rule, property values increase not decrease. if I sell it now I get a fixed amount - end of. If I rent it, then I keep the fixed amount (and maybe increase it if the value has gone up by the time I want to sell) but I also get an income from it. To me, that sounds like it makes more financial sense than just selling.
    • *Rainbow*Warrior*
    • By *Rainbow*Warrior* 15th Jun 17, 9:54 PM
    • 330 Posts
    • 64 Thanks
    *Rainbow*Warrior*
    • #7
    • 15th Jun 17, 9:54 PM
    • #7
    • 15th Jun 17, 9:54 PM
    Rental income could be factored into account. When applying for the new mortgage.

    If you don't intend living in your parents old house. Then for what purpose is it worth hanging onto. Plenty of ways you could use part of the inheritance you've received to have an everlasting memory.

    Owning two properties will incur additional stamp duty. Which depending on the purchase price might be a significant sum.
    Originally posted by Thrugelmir
    Only just seen this post - thanks Thrugelmir. Basically my reasons for not wanting to sell just yet are what I said the post above. I don't want the money to get dipped into. Plus it will hopefully increase in value if I hold onto it for a while. Also, if I'm earning rental income it means I get an income AND the equity, which is surely better than just getting the equity.
    • ViolaLass
    • By ViolaLass 16th Jun 17, 7:58 AM
    • 4,953 Posts
    • 6,808 Thanks
    ViolaLass
    • #8
    • 16th Jun 17, 7:58 AM
    • #8
    • 16th Jun 17, 7:58 AM
    If you sell and use the money to buy a new place, you will still have the equity and the possibility of it increasing.

    If you rent, and use the money (from a BTL mortgage) to buy a new place, you will still have the equity and the possibility of it increasing.

    Yes, you can have more than one mortgage. The question is, do you want to?

    What if the tenants trash the place? Can you afford it? Will it hurt emotionally? What if they do a runner? What about the extra stamp duty? Can you afford it? You'll effectively be paying it from the equity that you say you want to protect.
    • Trickzyy
    • By Trickzyy 16th Jun 17, 9:40 AM
    • 23 Posts
    • 17 Thanks
    Trickzyy
    • #9
    • 16th Jun 17, 9:40 AM
    • #9
    • 16th Jun 17, 9:40 AM
    If you want to move to a slightly bigger house, you could always take out a small BTL mortgage on your parents property - this will be subject to some restrictions depending on the amount you wish to raise.

    The BTL mortgage can be on either interest only or capital and interest (repayment).

    This equity added to your own will mean an increased deposit for your new home, the amount you can borrow will be subject to lenders standard affordability criteria.

    As others have said, just be aware about the additional stamp duty land tax (SDLT) liability as this can be a substantial amount depending on the purchase price.

    Although the decision on what to do is yours, you have been given an unencumbered asset which will give you a monthly income, and (hopefully) appreciate in value over the years. You could even use some of the net monthly profits for further investment(s) which could be set aside for your children at a later stage - money making more money.

    It may even be worth your while speaking to a financial adviser and seeking further advice.
    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.
    • Keep pedalling
    • By Keep pedalling 16th Jun 17, 11:44 AM
    • 3,140 Posts
    • 3,355 Thanks
    Keep pedalling
    Don't let sentiment overrule making a sensible decision on this. If you are not going to make your parents home your own, I would just let it go. How would you feel if you rented it out and some bad tenants made a mess of the place?
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,422Posts Today

8,739Users online

Martin's Twitter
  • RT @Emloy93: @MartinSLewis I did this! It 100% works ????????

  • RT @Photo_Pete: @MartinSLewis Thanks Martin, I'll renew mine before my 24th in September!

  • Tell any 23 yr olds... you're allowed to buy a 3 year 16-25 railcard the day before your 24th birthday then it's valid until ur almost 27 RT

  • Follow Martin