What lenders will ignore an existing mortgage?

Doglover88

Currently have 18 months left on a fixed rate @ 4.75% (early redemption penalty of 5%) outstanding balance of 100k. Property value of 170k. Want to take a further 40k out on it to use as deposit and fee's to purchase a property of family for reduced price.

I assumed I'd need to remortgage as BTL in order to get a new mortgage on family property, but have been told some lenders will ignore an existing mortgage if its covering itself when let, is this true?
and if so, what lenders would you suggest trying?

I was going to take out extra 40k interest only, and change my existing mtg to interest only (If they'll let me) and concentrate on paying off the mortgage on new place, as its bound to be a higher rate than 4.75% (currently looking at Woolwich fixed for 10yrs 4.98% I think)

Many thanks in advance

Robert_Sterling

The Woolwich 10 Year Fixed Rate looks competitive
E.G. Nationwide rate is 5.18%
However any early repayment at the Woolwich carries a penalty of
6% of the amount repaid.

silvercar

most lenders should ignore a BTL mortgage provided it is very clearly paying for itself.

MarkyMarkD

I'm not sure what you are asking here.

If you want to borrow an extra £40k on the property you live in, that's no issue at all (depending on affordability).

If you THEN go on to borrow on a BTL basis for the new property, there's no issue of ignoring the other mortgage - most BTL mortgages would expect you to have your own mortgage as well.

The only reason I can see what you are asking, making sense, is if you want to let out the existing property and buy the new one to live in.

If you want to do that, things are obviously a bit more complicated.

dunstonh

silvercar wrote:

most lenders should ignore a BTL mortgage provided it is very clearly paying for itself.

Its not so much that they ignore it. More a case that they note it, see it is paying for itself and dont take it into account when deciding how much they lend you.

Every lender is going to take your existing borrowing into account. So in answer to the question "but have been told some lenders will ignore an existing mortgage if its covering itself when let, is this true?", the answer is none of them ignore it.

However, many/most will not penalise you if it is not impacting upon your budget.

Doglover88

Oops sorry MarkyMark and dunstonh didnt explain that very clearly

My current mortgage (one i want to borrow extra 40k on) is a repayment fixed rate (4.75%) with 18 months to go til it goes variable (and i can shop around for another deal).
I'm after a lender for the new place, where i will be living, who will allow me a mortgage without my first one needing to be BTL (as i have a big redemption penalty to get out of it at present)

Yup, i'd like to let out my current property and live in the new one

Hope that makes a bit more sense?

herbiesjp

So you are therefore lookin at a Let to Buy scenario.

There are many lenders that can look at this, however it will depend on what your rental income on the first property will be and what your mortgage payments will then work out to be with the extra £40k

HTH

Doglover88

Hi Herbie

At present my payments are £710 pcm (repayment) and I wanted to take out the extra £40k as interest only (to keep initial repayments low as possible), and I would get £700 letting it out. I know this falls short of covering it but I do not need to borrow large multiples of my income, do you think even tho my first property will be costing me maybe £200 a month on paper, I would still get the mortgage I require?
Will it work the same as if I had a loan, they multiply your monthly outgoings (or rental loss in this case) by 12, and subtract it from your annual income?

Many thanks

MarkyMarkD

It's also important to note that your existing mortgage deal is a residential mortgage deal; your lender may refuse you permission to let whilst on that deal, or charge you a letting fee and/or an increase in the interest rate.

It's your legal duty to disclose the fact you are letting to the lender.