Buying a house before selling existing property

littlened

We've put in an offer on a repossession property. At the minute we have a small 2 bedroomed house with an outstanding mortgage of 44k, and a value of 63k.

Rather than wait to sell our existing property, we want to hopefully proceed buying the new property if our offer is accepted.

Our IFA has advised us we'll need to change our existing mortgage to buy to let while we have it up for sale so that we can get the 2nd mortgage. Is this the case?

We can afford to pay the 2 mortgages, which we work out will cost a total of £900 a month. In total the two properties will be mortgages for £116k

Between my wife and myself, we've got an annual income of around 50-60k

Do we really need to change the existing property to buy to let, or will we be able to keep the mortgage as it is while it's on the market?

poppysarah

If you really earn that much they why haven't you cleared your mortgage?

hethmar

I think that is the least of your worries, you just need to ring your lender and tell them what you want to do - they may just give you the nod without changing your mortgage. You will need to sort out the mortgage on the other place though as if your offer is accepted you may only have 28 to complete.

silvercar

The question is whether the lender on the new property will allow you the mortgage while you still have the first mortgage. Most lenders require you to repay the previous mortgage as a condition of the loan. If it is a buy to let and the rent covers the mortgage, it will be ignored as it washes its own face.

You should just be able to tell the second lender that you are letting the first property; they may ask to see a consent to let.

littlened

hethmar wrote: »

I think that is the least of your worries, you just need to ring your lender and tell them what you want to do - they may just give you the nod without changing your mortgage. You will need to sort out the mortgage on the other place though as if your offer is accepted you may only have 28 to complete.

our current lender doesn't provide buy-to-let mortgages

littlened

silvercar wrote: »

The question is whether the lender on the new property will allow you the mortgage while you still have the first mortgage. Most lenders require you to repay the previous mortgage as a condition of the loan. If it is a buy to let and the rent covers the mortgage, it will be ignored as it washes its own face.

You should just be able to tell the second lender that you are letting the first property; they may ask to see a consent to let.

When you say consent to let, would that be either a letter from an existing mortgage company stating they allow us to let the property, or confirmation of a buy-to-let mortgage being taken out.

silvercar

littlened wrote: »

When you say consent to let, would that be either a letter from an existing mortgage company stating they allow us to let the property, or confirmation of a buy-to-let mortgage being taken out.

Yes. The new lender really wants to know that all your income can be used to service the new property as there will be a presumed rental income on the old one.

Rick62

If you can afford both mortgages, which you can with your incomes, then there will be no problem just leaving the existing mortgage as it is, assuming you are just selling it and are not planning to let it.

It sounds like your broker is either stupid or trying to get extra commission for something you don't need.

As a general bit of advice I would be wary of buying before you have sold in todays market, although in your case you are not too stretched and if you are buying the cheap repo then you have to make that judgement.

spuds_2

Most lenders will allow you to rent out a property - no way do you have to change to a BTL mortgage. Sounds like an attempt to get commission to me.

Ours does not make a charge, but you need to check as some make a nominal charge. Either way you must inform them as it has insurance implications.

If you are not renting out your original property then the only issue is whether your new lender thinks you can afford the second mortgage. I don't think getting a BTL mortgage comes into it all. Of course your FA will get several hundreds of pounds worth of commission from the new lender if you start a new mortgage and you may have to pay fees and exit fees.

littlened

I've told our IFA that I've asked abbey for permission to rent the property and I'm waiting a decision, he says that won't make any difference, as when we apply for a mortgage for the new house, they will see that we have a normal mortgage out on an existing property and it'll go against us. I asked if we could send them a letter of consent from our existing mortgage company and he said that wouldn't work.

I don't want to arrange a BLT mortgage if we don't need to.

My other issue I have is that recently I've got a new bank account and credit card, in the last 3 month I've had 4 searches on my credit file, and all of this has reduced my credit rating. I'm worried further searching to find a BLT might reduce it further and effect our chances of getting a decent rate mortgage for the property we want to buy.

Rick62

I thought you wanted to sell your existing house?

Read my earlier mail again - how can I be clearer - you do not need to change your current mortgage in order to get your new mortgage. Your broker is stupid or is lying.