Remortgaging advise, how to restructure multiple mortgages?

observingthedebate

Firstly I would like to say Hi to everyone as I am new to posting, although I have been reading on and off for some time.

I have a question I would like to submit on remortgaging as I am about to come to the end of one the discount terms on our mortgages (yes it is plural!). I will explain:

Me and my wife together own 3 properties/mortgages, we are your classic London professional couple, own flat, meet, move in together, buy bigger place but keep the flat cause it seems a good idea, get married etc. etc.

Our mortgages are all on trackers on good terms actually. Listing our mortgages in order of those needing to be remortgaged sooner:

1 - London flat
Mortagage 170k approx
IR at the moment 0.28% below Base.
Flat rented at 1200 pcm and all is going towards repayment.
This deal will expire Feb 2010.
Term remaining 18 years.
Value on Zoopla: 295k

2 - London flat:
Mortgage 80k.
IR 0.65% above Base but its a lifetime tracker.
Flat rented at 900pcm with 500 going towards repayment (overpaying 100 a month).
Term remaining 22 years, but we can renegotiate this immediately.
Value on Zoopla: 190k

3 - London house (main reseidence):
Mortgage: 280k on a lifetime tracker at 0.69% above Base.
We are currently paying 1500 pcm which is 270 overpayment at current IR.
Term remaining 22 years, we can remortgage in October 2010.
Value on Zoopla: 440k

Combined income is 125k p.a. + bonuses (that hated word) - and no we do not work in banks!!!
We have savings of about 95k
We have unsecured debts (CC, OD and loans combined) for about 16k

Now I think the numbers sound pretty good and our household balance-sheet looks healthy, maybe too much unsecured debt but we are on it with repaying them (about 1k a month at the moment).

The question I have for the forum is:
How would you restructure these mortgages considering incomes and other debts?
What's your views on IR's?

The assumption we have is that we want to keep the properties as they are manageable with our income and we are thinking to use them as a way to boost pension income rather then for the equity. I know we could clear main mortgage propably if we were to sell now, but at the moment we cope OK with things. Houseprices are probably going down in the short term but I think we have enough equity in those not to be in NE and in any case we are not in it for the equity anyway, they are just income producing assets one day.

I hope I made the question clear enough and given enough info.







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Mrs_Bumble

Are you suggesting doing anything about the 2 mortgages that are lifetime trackers as they are very nice little gems at the moment or just the one that is about to finish its discount rate?

Are any of them Buy to Let mortgages or do you have residential with consent to let? If so how long do you have consent to let for?

If you have savings of that amount, why do you have unsecured debt of that amount?

observingthedebate

Thanks Mrs Bumble,

Well to your first question, I know the deals are very good and there's nothing nearly as good at the moement on the market, however I am concerned about IR and the way the may shoot up.

Considering the 3 positions, I was wondering if there was a way to refinance the bundle and get a good but more stable deal. Also considering the savings we have.

They are not BTL and yes we have consent from the lender.

As for the unsecured, I think the answer you are looking for is that we got married recently and paid most on CC (I know its naughty but a one off!! hopefully!!!)

Any thoughts?

Mrs_Bumble

I don't deal with buy to let and I am sure one of my colleagues will join us in this discussion bit later

But looking at the deals you have at present the IR would have to shoot up an awful lot to put you at a higher rate than you took them on at originally??

How long is the consent to let, has the lenders put a time limit on it? Can't imagine a lender being that happy that these nice little interest rates stay with a let in place forever??

With 3 residential mortgages I think you will struggle to remortgage on a residential basis to be honest, not sure how lenders at the moment would feel about this, normally ok with 2 but you have 3 and that would require some enquiries.

If you are intending on keeping these properties in the long term I think you are going to have to eventually switch to a buy to let agreement on at least one of them.

Do you declare the income you receive to the inland revenue? If so do you have submitted accounts for this as it could then be included as income, as even though you have a nice salary think it might be tight, if not able to use your bonus etc.

Think you need to sit down with an independent mortgage broker who operates in both buy to let and residential fields so you can see what is the best way forward and the benefits of buy to let if you are going to continue on a more formal business front.

Sorry that probably doesn't help much!

observingthedebate

Thanks again, we do not have time limits on the 2nd flat (the one with the lifetime) but i am not 100% sure on the one about to expire.

Incomes are of course declared on both our tax statements but we do not submit accounts, we have not been asked to. Should we? I have never thought about it before to be honest. In truth until the last 12 months we never had to pay taxes as the IR was quite high and once deductions were made (wear & tear etc) we barely broke even. Different now where on one flat the one expiring, the interest charge is 33 quid a month over a 1200 quid income!

Are you suggesting we would be better off with restructuring this into 2 mortgages, the two lifetimes perhaps?

We could increase mortgages and use the savings to clear one mortgage and use the rental to help us pay the higher mortgages. Is that nonsense?

Trollfever

Incomes are of course declared on both our tax statements but we do not submit accounts, we have not been asked to.

As you are running a property letting business, accounts should be submitted to HMR&C.

Mrs_Bumble

You are earning income from these properties and as such should be keeping accounts for income and expenditure and the details from these should be submitted on an Inland Revenue form can't remember the name of it but part of the self assessment form and declared as income.

I honestly think that you would benefit from speaking to an independent whole of market mortgage broker that deals in buy to let and residential as they will know what is the best way to restructure your current situation, tax breaks etc. Sorry it sounds like a kop out but I really don't deal with buy to let and so can't break down the tax breaks and benefits for you.

observingthedebate

Re the Accounts:

The self-assessment requires us, individually, to declare total amounts of income from rental and total demonstrable expenses. As I am a private individual, not running a busines, I am not obliged to file accounts, I am not a company. I will investigate further if you all think I am wrong but this is the advise I had in the past and have been filing my returns (declaring the income) which HMRC has not questioned.

I wonder if this is because the flats belong one to me one to my wife (and we got married recently). I will find out and update.

Mrs_Bumble

Maybe I have not put it very well, you need to keep accounts, you only have to submit the information onto the self assessment forms but it is important to actually keep the accounts as the inland revenue can request the information for audit purposes, they can actually check what you are claiming as expenses etc.

Anyway seek out a good independent mortgage broker that deals in both buy to let and residential.

observingthedebate

But of course we keep records/accounts of everything... :money:

Jonbvn

I won't comment on the mortgages themselves, which I believe you need professional advice on.

I did notice that you are using all the rental income from your properties to pay-off capital. Given your extremely low interest rates, surely this is not the best approach, since you can get a much better return from paying off your unsecured debts (followed by saving accounts)? I.e. always pay off the highest interest loans first.