new mortgage secured against mortgage free property

alrhios

Hi
I own 3 flats. I dont want to sell these, but wish to buy another property.
Does anyone know if I can use these flats to secure a new mortgage and if so, what sort of mortgage it would be?
All three flats are mortgage free.
Thanks,

Lucy

PasturesNew

Just get a mortgage on one. Simple as that. The fact you own them outright already is a red herring. If you're renting them out you'd need a Buy to Let mortgage, but that's it.

socrates

There are no banks that are taking charges over unencumbered properties and lending money against them for people to buy other properties with.

The only way you can achieve what you are looking to do is by being dishonest on your mortgage application - and mortgage departments are going through things with a fine tooth comb - after all they are not exactly inundated with work at the moment!

If you are living in one of the properties and it has no mortgage the only way to do it (and I am not condoning it) is to apply for an offset mortgage like the First Direct are offering at the moment. They will lend around 3X salary and up to 80% of the valuation, if your BTL properties are self financing they will disregard them. You must have a good/valid reason for drawing out money from the property - and by telling them it is for the purchase of another property you will have no chance.

Then if you do get the mortgage you can draw down the funds and do what you want with them.

Just to reiterate I think this is a very risky process and I think the BTL market will return sooner or later so perhaps best to wait.

silvercar

alrhios wrote: »

Hi
I own 3 flats. I dont want to sell these, but wish to buy another property.
Does anyone know if I can use these flats to secure a new mortgage and if so, what sort of mortgage it would be?
All three flats are mortgage free.
Thanks,

Lucy

I would have thought it would be easy to arrange. You will probably be limited to the amount you can mortgage on each one, probably 60-80% of their value, provided the rental income can support the mortgage payments comfortably.

If they are not rented, then you will need an income to prove you can meet the mortgage payments.

As BTL mortgages are slightly higher interest rates than residential, it may be easier to arrange a residential mortgage on the property you wish to buy. You would need an income to do this, generally banks lend 3 times income with no problems, provided your credit rating is good.

socrates

silvercar we often cross on these forums.

Am I correct in understanding that you can indeed secure against these flats to buy another property without a deposit?

Or are you saying get a mortgage on the mortgage free property to generate a deposit?

Also the OP is not clear on this point are they moving into the other property or it is for rental purposes?

I do not think it is easy to draw down money from unencumbered BTL properties at the moment - I would interested to know who the lender is.

alrhios

Thank you for your replies.
We are living in one and rent out the other 2. We are looking to buy a larger property for ourselves to live in. We will also be running a business from this new property, so would we be better in asking about a commercial mortgage???
Thanks,

Lucy

socrates

Once you start talking commercial/BTL mortgages etc the banks will stop listening unless you have large deposits.

I would imagine you are looking to rent out the property you are currently living in when you do move so it automatically becomes a BTL situation.

Do you have a deposit?

It might be better as previously advised to go for a straight residential and leave these properties unencumbered.

If you do not have a deposit then you either do what I advised earlier - which I do not condone or my learned friend silvercar will advise accordingly.

silvercar

silvercar we often cross on these forums.

I rarely notice the name of the poster, just post my opinions.

I'd post on the mortgage board and ask how easy it is to get a BTL mortgage on a let un-mortgaged property.

From personal experience, a friend recently inherited a mortgage-free property and had no problem securing a 50% LTV BTL mortgage on it. The rent was sufficient to well cover the mortgage and the friend had a steady job and already lived in a mortgage home. The purpose of the mortgage was to buy a second home on the coast; I'm not sure if he then got a further mortgage on that one.

socrates

Thanks for not noticing me - at least you do now.

The title of the thread is new mortgage secured against mortgage free property.

This to me implies using a mortgage free property as collateral rather than a deposit - which as far as I know and stand to be corrected is unavailable with any lender.

When the OP answers the question about their deposit situation then we can proceed.