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  • FIRST POST
    • MartinLewisFan
    • By MartinLewisFan 9th Oct 17, 2:18 PM
    • 11Posts
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    MartinLewisFan
    Buying a second home...
    • #1
    • 9th Oct 17, 2:18 PM
    Buying a second home... 9th Oct 17 at 2:18 PM
    Hey Folks

    (Still a newbie, and only my second post - so apologies in advance it appears weak!)

    OK, so, I'm looking at getting a second home - not so much as a buy to let, but rather to move into a larger home, and offering the smaller home to my "fiercely-independent" mother to live in.

    The mortgage on the original small home is very modest, and dear-ol'-mum has agreed to contribute to the small mortgage outstanding, freeing me up to find a new home.

    I suppose my question is, having found suitable home(s) (well, options), can I use any of the collateral on my first home?

    As ever, any advice is gratefully received.
Page 1
    • G_M
    • By G_M 9th Oct 17, 2:25 PM
    • 41,427 Posts
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    G_M
    • #2
    • 9th Oct 17, 2:25 PM
    • #2
    • 9th Oct 17, 2:25 PM
    Remember your 2nd roperty will attract Additional 3% SDLT.

    Yes, you could use 'collateral' (equity?) on your existing property by increasing the mortgage on it to free up cash towards your 2nd property - providing of course your income is sufficient to justify both mortgages (assuming a 2nd mortgage on the 2nd home.

    Speak to an independant mortgage broker about lenders for a 2nd property and your income /entitlement.

    You might have problems with your current lender though as your crrent mortgage is presumably a standard residential mortgage - you're expeted to use it as your main residence.

    Probably have to switch to a BTL mrtgage (mum is paying you rent if she's "agreed to contribute to the small mortgage outstanding"), so you'll be a landlord. See lnk elow for more on that!

    And many BTL mortgages don't permit letting to family...... again, see an independant mortgage broker.


    * New landlords: advice, information & links
    • kingstreet
    • By kingstreet 9th Oct 17, 3:23 PM
    • 32,063 Posts
    • 17,160 Thanks
    kingstreet
    • #3
    • 9th Oct 17, 3:23 PM
    • #3
    • 9th Oct 17, 3:23 PM
    I suppose my question is, having found suitable home(s) (well, options), can I use any of the collateral on my first home?
    Originally posted by MartinLewisFan
    No.

    The last cross-charge facility ended some years ago.

    As G_M has indicated, you would actually need to borrow by increasing the mortgage on the current property and this will be problematic due to your plans for its occupancy.
    I am a mortgage broker. 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. Please do not send PMs asking for one-to-one-advice, or representation.
    • LEJC
    • By LEJC 9th Oct 17, 3:28 PM
    • 9,178 Posts
    • 57,595 Thanks
    LEJC
    • #4
    • 9th Oct 17, 3:28 PM
    • #4
    • 9th Oct 17, 3:28 PM
    Someones going to ask it so it might as well be me...where is mum living at the moment?
    frugal October...£37.39 of £40 food shopping spend for the 2 of us!

    2017 toiletries challenge 141 out 118 in ...£14.92 spend
    • MartinLewisFan
    • By MartinLewisFan 9th Oct 17, 10:15 PM
    • 11 Posts
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    MartinLewisFan
    • #5
    • 9th Oct 17, 10:15 PM
    • #5
    • 9th Oct 17, 10:15 PM
    G_M, Kingstreet - Thank you both for your excellent input and insight.

    MSE is a brilliant forum and all the posters are the reason for it.

    So much to think about!

    LEJC - excellent question (made me chuckle as well!) - My mother is actually recently retired, and renting privately for sometime, but because we're not very smart, and didn't have the means either, so we've recently come to realise late in the day that she's using her hard earned savings and pension to fund a stranger's mortgage (no offense intended!) instead of putting her putting that money to work closer to home (if you'll pardon the pun!)


    She's paying over a grand month for a humble place to rent, and that's way more than my current mortgage. I said she can take my home for free and I'll buy another place, but having worked all her life, she'll not have it. The compromise is that she'll only move into my place if she pays the mortgage - fair enough.

    She'll save a lot by doing that, but it will leave me with a challenge of finding and funding my next [family] home. Hence my question :-)

    I think the long-n-short of it is: work harder, try to earn more (not always easy!)
    • 00ec25
    • By 00ec25 9th Oct 17, 11:29 PM
    • 5,015 Posts
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    00ec25
    • #6
    • 9th Oct 17, 11:29 PM
    • #6
    • 9th Oct 17, 11:29 PM
    The compromise is that she'll only move into my place if she pays the mortgage - fair enough.

    She'll save a lot by doing that, but it will leave me with a challenge of finding and funding my next [family] home. Hence my question :-)

    I think the long-n-short of it is: work harder, try to earn more (not always easy!)
    Originally posted by MartinLewisFan
    so, if you take out a mortgage on your ex home and your mother pays money towards it that means you are legally her LL as mother is neither named on the mortgage nor is she an owner of the property

    it sounds like no lender would accept her on a mortgage anyway, and you cannot be an owner of a property that has a mortgage without being a party to it as the lender will not allow it.

    so...
    you will be in receipt of rent from your tenant
    you will pay a mortgage

    as your tenant is your mother then the mortgage will be a Regulated BTL mortgage. Very few lenders offer those so you will need a broker and will have to shop around to find a lender willing to give you such a loan (at possibly a high rate). A Regulated BLT mortgage means it will be based on your own income, not the level of rent paid by your mother. So you may or may not be able to get a separate mortgage on the place you are buying because lenders will do your affordability calculation on the basis your income is already allocated to an existing mortgage and so you may not have much left over with which to fund a second mortgage

    therefore you will need to do your sums carefully to find out how much you can borrow in total and how much, if any, of that would make sense to have as a Regulated mortgage on your ex home.

    As you will have a rental income from your mother you will also need to be careful about how much income tax you may have to pay on that rent. If the mortgage is a repayment one that only the interest element can be offset against your income for tax purposes. Any capital repayment element is taxable against you

    you have a lot of things to consider....
    • MartinLewisFan
    • By MartinLewisFan 9th Oct 17, 11:51 PM
    • 11 Posts
    • 1 Thanks
    MartinLewisFan
    • #7
    • 9th Oct 17, 11:51 PM
    • #7
    • 9th Oct 17, 11:51 PM
    OOec25

    Many things to consider indeed!

    I didn't realise it would be this challenging, but then again, things are that worth it often are!

    Without going into the actual numbers, as it stands, I've been pretty sensible (no extravagance, no debts... Yet!), so:

    1. My current home (proposed ex-home) has 1:3 ratio in terms of mortgage to home value (so around 33% of mortgage outstanding).

    2. Income wise, the monthly Mortgage payment takes 15% of net income. If Mum takes over, and pays the mortgage, then this would drop to zero, freeing me up divert income to that second home (the new family home).

    I wonder if that's something the banks would consider...

    Lots to ponder - I think I'll be giving an Independent Mortgage Broker a headache soon!
    • hazyjo
    • By hazyjo 10th Oct 17, 9:53 AM
    • 9,624 Posts
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    hazyjo
    • #8
    • 10th Oct 17, 9:53 AM
    • #8
    • 10th Oct 17, 9:53 AM

    2. Income wise, the monthly Mortgage payment takes 15% of net income. If Mum takes over, and pays the mortgage, then this would drop to zero, freeing me up divert income to that second home (the new family home).
    Originally posted by MartinLewisFan
    You need to lose the thought of your mum 'taking over the mortgage'. She's not. You will be totally responsible for it and you will be the bank's risk. Whatever she pays you will be classed as rent. You cannot avoid the fact she will be a tenant and you will be a LL.
    2017 wins: Opera tickets; film preview; lipstick; Ideal Home Show tickets + afternoon tea & bottle of Champagne; 2 cases of NKD; notebook; bath rack; books; film Premiere; Broadchurch DVDs; lipbalms; hamper (food/wine/Echo Dot/Jo Malone goodies); Avon lippies; cowhide rug; Windsor luxury break, foundation; Flybe flight
    • saajan_12
    • By saajan_12 10th Oct 17, 9:54 AM
    • 834 Posts
    • 547 Thanks
    saajan_12
    • #9
    • 10th Oct 17, 9:54 AM
    • #9
    • 10th Oct 17, 9:54 AM
    2. Income wise, the monthly Mortgage payment takes 15% of net income. If Mum takes over, and pays the mortgage
    Originally posted by MartinLewisFan
    That's all well and good, but your current mortgage is likely a residential one, for you to live there. In order to let it to your mother, you would need either
    a. Consent to Let from your lender (they may/may not agree as the tenant is a relative and if they do, probably for a limited time period); or
    b. Regulated Buy To Let mortgage (fewer choice of lenders, much higher interest rate than a residential so higher mortgage payments)

    Could mum afford this?

    If Mum takes over, and pays the mortgage, then this would drop to zero, freeing me up divert income to that second home (the new family home).
    I wonder if that's something the banks would consider...
    Originally posted by MartinLewisFan
    Yes and no.. you're still responsible for the mortgage on the current property and as the tenant is a relative, the lender will assume you'll be unlikely to evict if mum stops paying. So the current mortgage will be treated as part of your outgoings when calculating affordability for the new mortgage.
    Can you afford that?

    Plus you'll have to pay higher rate stamp duty on your purchase, so an extra 3% of the total price to be paid upfront.
    Can you afford that?
    • aneary
    • By aneary 10th Oct 17, 9:59 AM
    • 604 Posts
    • 453 Thanks
    aneary
    Have you thought of selling the current house and look for a house which has a granny annex, you would avoid a lot of the headache then? Or even a house that has the space (plus likely PP) to build one?
    • G_M
    • By G_M 10th Oct 17, 11:33 AM
    • 41,427 Posts
    • 47,767 Thanks
    G_M
    Have you thought of selling the current house and look for a house which has a granny annex, you would avoid a lot of the headache then? Or even a house that has the space (plus likely PP) to build one?
    Originally posted by aneary
    OP can buy my home with granny annexe.....when I find the ideal property I've been searching for for the last 2+ years........
    • MartinLewisFan
    • By MartinLewisFan 10th Oct 17, 12:28 PM
    • 11 Posts
    • 1 Thanks
    MartinLewisFan
    Hi hazyjo - thank you for your comment; indeed i have and I do consider this element - hence the "IF".

    Hello saajan_12 - thank you for the considered response and questions posed. the answer is yes - for now. But after another financial crisis, who knows eh!

    Hi aneary - indeed I have! but it seems like the search and coordination is taking forever (as G_M alluded to in his post!)
    • MoneyGeoff
    • By MoneyGeoff 10th Oct 17, 12:44 PM
    • 74 Posts
    • 36 Thanks
    MoneyGeoff
    Don't forget you'll need to declare and pay income tax on your rental income. If the rental income pushes you into a new tax band you'll probably be making a loss on this arrangement.
    • Rambosmum
    • By Rambosmum 10th Oct 17, 1:07 PM
    • 1,478 Posts
    • 1,929 Thanks
    Rambosmum
    You could speak to your current lender and get 'consent to let'. It means they allow you to rent out your home on your current residential mortgage, but you can't remortgage under the same turns.


    May be the simplest solution for you.
    • hazyjo
    • By hazyjo 10th Oct 17, 1:11 PM
    • 9,624 Posts
    • 12,138 Thanks
    hazyjo
    Hi hazyjo - thank you for your comment; indeed i have and I do consider this element - hence the "IF".
    Originally posted by MartinLewisFan
    There is no case of 'if' though. That's what we're saying
    2017 wins: Opera tickets; film preview; lipstick; Ideal Home Show tickets + afternoon tea & bottle of Champagne; 2 cases of NKD; notebook; bath rack; books; film Premiere; Broadchurch DVDs; lipbalms; hamper (food/wine/Echo Dot/Jo Malone goodies); Avon lippies; cowhide rug; Windsor luxury break, foundation; Flybe flight
    • Slithery
    • By Slithery 10th Oct 17, 1:19 PM
    • 241 Posts
    • 307 Thanks
    Slithery
    You could speak to your current lender and get 'consent to let'. It means they allow you to rent out your home on your current residential mortgage, but you can't remortgage under the same turns.


    May be the simplest solution for you.
    Originally posted by Rambosmum
    I think you'll find that most lenders won't give consent to let if the property is being rented by a family member.
    • Rambosmum
    • By Rambosmum 10th Oct 17, 1:23 PM
    • 1,478 Posts
    • 1,929 Thanks
    Rambosmum
    I think you'll find that most lenders won't give consent to let if the property is being rented by a family member.
    Originally posted by Slithery




    It's worth asking though, we've had it before where the consent to let addendum basically said "consent to let as a residential dwelling".
    • MartinLewisFan
    • By MartinLewisFan 10th Oct 17, 5:34 PM
    • 11 Posts
    • 1 Thanks
    MartinLewisFan
    MoneyGeoff - Aye, I'm already there mate, and sometimes I wonder what the point of all the graft is for - but let's not go there, and it is "tax" after all, the price of existing and being here rather than elsewhere as they say :-)

    Rambosmum - great name by the way, and Slithery - I will be making an inquiry to see what the current lender (Halifax) can do - considering that they've offered me a very good deal on my re-mortgage i'm not holding my breath!

    Hello hazyjo - indeed. You're preaching to the choir :-) I'm incredibly risk averse, and yet, bizarrely, every major positive in my life thus far came about via taking a big risk. what a strange world we live in.
    • dd17
    • By dd17 10th Oct 17, 8:51 PM
    • 2 Posts
    • 0 Thanks
    dd17
    Hi I'm after some advice with regards to stamp duty,

    I'm not sure I'm posting correctly as I've just joined? But trying to look at related threads to answer my question but still confused
    I'm currently a sole owner of my property
    Listed it for sale some months ago- now having doubts and thinking I'm going to keep hold and rent out
    My partner an I will be getting a property together
    He is not a home owner
    I understand I will possibly be affected by SDLT as an owner of a second home but wondering if this should affect the pair of us as he isn't an existing home owner any advice would be appreciated!

    Thanks in advance
    • 00ec25
    • By 00ec25 10th Oct 17, 10:13 PM
    • 5,015 Posts
    • 4,359 Thanks
    00ec25
    Hi I'm after some advice with regards to stamp duty,

    I'm not sure I'm posting correctly as I've just joined? But trying to look at related threads to answer my question but still confused
    Originally posted by dd17
    rather than clicking on reply after you have opened an individual "thread", what you should have done is to start a "new thread" by clicking on the link that says that at the top left of the screen under the board's name: house buying renting & selling
    I'm currently a sole owner of my property
    Listed it for sale some months ago- now having doubts and thinking I'm going to keep hold and rent out
    My partner an I will be getting a property together
    He is not a home owner
    I understand I will possibly be affected by SDLT as an owner of a second home but wondering if this should affect the pair of us as he isn't an existing home owner any advice would be appreciated!

    Thanks in advance
    Originally posted by dd17
    if you buy as joint owners then the higher rate SDLT is charged on the WHOLE purchase price on the basis that if one person owns a home and has not sold it then they are buying an additional property and that means the rule applies to both purchasers

    this is explained in the guide if you read it
    https://www.gov.uk/government/publications/stamp-duty-land-tax-higher-rates-for-purchases-of-additional-residential-properties

    also read the detailed answer from a few days ago :
    http://forums.moneysavingexpert.com/showthread.php?p=73232965#post73232965
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