Mortgage dilemma

manic

This is my first post.

I would like some advice on my situation.

I own a flat, current value £165k. The outstanding mortgage is £3.7k (Halifax) in my sole name. I would like to remortgage now to raise some capital (about £140k - 90%ish LTV), and get my partner put onto the mortgage. The problem is that we will probably be moving out within a few months and would like to rent it out then.

Are there any lenders who would accept the change of use, without having to do a buy-to-let?

Any comments will be greatly appreciated.

dougk_2

Nationwide are quite friendly with this approach of renting out without changing mortgage.

You may not be able to get 90% though as the amount the mortgage companies will lend is based on your salary (or salaries if joint owned) not the sole value of the property.

For example to get the amount you want you will need to be earning somewhere around £50-60k a year joint income.

For a buy to let mortgage of £140k (if someone would lend 90% on Buy to let) then your rental income would need to be about £1000 pcm minimum.

You would be better in IMO to stay as is (save any surplus money) and then sell completely to buy a new house.

herbiesjp

Hi there

The basic answer to your question, in generic terms is yes. There are lenders that could do this for you - some may charge for the benefit, some may not, and some may change your rate.

There are a few questions that need answering though:

What is the purpose of the capital raising?
Is it to buy a new property?
Will you need to borrow extra money?
Is all this affordable to you?

Also the new lender would need to be sure that the rental income would cover the mortgage payments (this varies but is normally around 125% - 130% cover).

Lots of questions you need to ask, as the lenders will ask them also.

If you need more info just post away.

manic

Thanks for the replies so far.

For example to get the amount you want you will need to be earning somewhere around £50-60k a year joint income.

Joint income is not a problem.

For a buy to let mortgage of £140k (if someone would lend 90% on Buy to let) then your rental income would need to be about £1000 pcm minimum.

On a buy to let mortgage I would only be able to borrow £110k (quoted rental for my property is £700 pcm), also, I would be paying 1% more interest than for a "normal" mortgage (approx. £90/month).

You would be better in IMO to stay as is (save any surplus money) and then sell completely to buy a new house.

I don't need to sell to buy a new house.

What is the purpose of the capital raising?

The capital is for a business project (I'm self employed).

Is it to buy a new property?

Not immediately.

Will you need to borrow extra money?

No.

Is all this affordable to you?

Yes.

Also the new lender would need to be sure that the rental income would cover the mortgage payments (this varies but is normally around 125% - 130% cover).

Would that be the case if you already had a mortgage that exceeded this amount. For example: Current payments £612 (£140k interest only mortgage, 5.25% rate). Rental income £700 pcm = mortgage payment of £538, a shortfall of £74/month.


On the subject of getting my partner put on the mortgage. Would we need to get her name put on the deeds before arranging the new mortgage (whichever type it will be), or would that be done as part of the re-mortgaging process?

herbiesjp

Just a few quick responses:

THe maximum ltv is BTL is 85% so not an option anyway.

The problem is not so much the re-mortgage process but finding a lender that will allow you to capital raise for business purposes up to the level you need.

Most lenders have levels lower than that.

As for putting your partner on the Deeds, yes this is done all at the same time as the re-mortgage process.

Hope this helps.

manic

Thanks for the advice so far.

The situation has just changed.

We have, out of the blue, found a house we want to live in (we were looking, but nothing took our fancy and most estate agents have been very slow at getting any details to us). We have had our offer of £272K accepted and all is going well.

In order to secure a quick purchase, I am "borrowing" the funds from my business, which I will have to pay back through getting mortgages at some point. I still intend to keep my flat, so I assume that I will have to get a BTL mortgage of about £110K (based on a rental income of £700 pcm). I then want to mortgage the new house for as much as possible in order to help pay back what I borrowed & to have some left over for a new garage/extension on the house. Being self-employed, I am under the impression that an offset mortgage would be best for me, due to the need to pay varying amounts without penalty.

My questions are:

Does the fact that I am mortgaging the properties to re-pay the borrowed money have any issues?
Are there any good BTL deals around at the moment?
Is an offset mortgage the best option for the second property?