Want to move, without selling and no deposit

philhoward

We want to move from where we are (not good for work and sick of some of the neighbours), but don't want to sell this house (intending to keep it as a sort fo pension & rent out but needs work doing first), but we have no deposit. Can we use the equity in this one as security instead of a deposit on a new (to us) house? Wife currently suffers from ME/depression, so couldn't undergo the stress of selling and moving in one day.

Numbers (as this may have some importance):
Current house worth about 110k; so about 85-90k equity
Looking at something around 130-150k
Earnings 45-50k/year

Is it possible? Especially given this current financial climate!

WTTM

philhoward wrote: »

We want to move from where we are (not good for work and sick of some of the neighbours), but don't want to sell this house (intending to keep it as a sort fo pension & rent out but needs work doing first), but we have no deposit. Can we use the equity in this one as security instead of a deposit on a new (to us) house? Wife currently suffers from ME/depression, so couldn't undergo the stress of selling and moving in one day.

Numbers (as this may have some importance):
Current house worth about 110k; so about 85-90k equity
Looking at something around 130-150k
Earnings 45-50k/year

Is it possible? Especially given this current financial climate!

No - deposit required or sell existing house and buy a new one.


MOMENT

joolley

Yes. In theory.

If you really have that much equity, you can remortgage to btl, release some equity which can act as a deposit and move.

But the usual caveats will apply...is there a market, can you manage both mortgages for periods when not let, other borrowing, age, credit rating, etc, etc

opinions4u

While there are ways and means (full of caveats), as joolley suggest above, I don't think effectively piling your pension provision in to a single property is a particularly good idea.

philhoward

Short and sweet, WTTM

joolley; liking the idea, so will have to do the sums (and for now assume no rental income - if i can afford it like that, then should be fine). Thats a possibility i hadn't yet considered.

Credit history hasn't been good, but might need some clearing up from a tricky patch 7 or 8 years ago. Just finished a secured loan on this house (as aside from that sticky patch), so that should count well - I hope.

Theoretically it will be same amount being mortgaged overall, just spread differently..?

Mortgage 1 - about 15k left
"New" mortgage - say 140k = total 155k

Change Mortgage 1 to 45k
"New", 30k down, 110k mortgage = total 155k

Is there anything wrong with this - morally or legally? Only possible issue - 155k is more than 3 times my income (well, not if i include wife's benefits).. Does the intention to let house no.1 out come into the calculations when a lender considers such a proposal - and would i be best going to a single lender, or maybe just use a single broker?

philhoward

opinions4u wrote: »

While there are ways and means (full of caveats), as joolley suggest above, I don't think effectively piling your pension provision in to a single property is a particularly good idea.

Not my whole pension, opinions4u, just a case of a bit more:cool:

joolley

You can have as many mortgages as your salary and the banks will allow you to have. You can have 2 residential mortgages as long as the total falls within the salary multiples and affordability that the bank will allow you to borrow. If the bank allows you to have 3.5 x salary with your current outgoings, then you're laughing. Remortgage, release equity and then second mortgage. However, you will not be able to let property 1 without permission as it will be on a residential mortgage. The bank may ask you to swap to btl anyway or allow you permission to let.

If you have 1 btl mortgage and one residential, the btl is not considered in the bank's calculations of affordability. But sensibly, you should include it in your own calculations on how much you willing to stretch yourself and your family's finances.

Now, don't take my word. Somebody sensible will come along and rip all of this to pieces. I am not a financial advisor but have bought and sold 4 houses, with a few overlaps here and there, requiring permission to let. I also accidentally stumbled across a holiday let and currently pursuing another.

joolley

And to answer your question about brokers or lenders, it depends. I like to go straight to a lender because I feel able to do all my research and I know what I want. I am also very demanding and pedantic to a fault and read all my documents to the last letter. I have also bought with pretty large deposits so have had more products available to me. If you feel that there are many questions that you will want answered and feel that a whole of market advisor may be able to guide you through something entirely knew to you better than going alone, then definitely go to a good whole of market broker.

philhoward

Quick check of the sums looks within our "limits" based on disposable income (assuming a zero rental income)..think its time to do either some more research, or speak to a whole market broker..

VIGILANT22

For what you're considering, by all means do your own research but also take the advice of a whole of market adviser...I have known many people who thot they knew what they were doing but later come unstuck because of taxes etc..

Yr credit history goes back 6 years...obtain a copy on line from one of the 3 providers..equifax etc...this can be done free remember and read how!

Rental Income for BTL's has to be 125/130% of mortgage payments, Interest Only is the most effective. The surveyor recommends to the lender the rental income by taking comparables in the area...but you can charge as you wish (within reason!!)

The LTV on btl's is max 75%

As you will be bringing what was yr residence into the business (btl is business)...you can release equity for deposit on new home and claim tax relief on both properties...

http://www.hmrc.gov.uk/MANUALS/BIMMANUAL/bim45700.htm

new_home_owner_3

Why dont you remortgage your house on a long 5 year fixed deal, make sure they will give you consent to let in the future and there are no hidden pitfalls.

If you have 90k equity and they house is worth 110,000 remorgtage for 60,000 pound interest only on a five year deal, then when another house comes up you like get consent to let and use the 60,000 pound as a deposit for another residential mortgage.

This way you will have two low residential mortgages and no high btl mortgage, eventually if you are going to rent long term you will have to go on a btl mortgage but this will give you a good start.