2nd Mortgage Help!

amillionlittlepieces

Hi,

I currently own a property which I still have a mortgage with in negative equity, due to the fact I cant sell I'm looking to rent out to make a bit extra and move to another property, is it possible to get another Mortgage for another property having my existing mortgage still?

Thanks

kingstreet

Yes. You'll need consent to let from your current lender and you'll have to ask your buildings insurer to change your cover as you'll no longer be owner occupier.

You'll need a deposit for the new property and you'll need a lender willing to ignore the first property, or who'll take the current mortgage payment into account like a credit agreement, otherwise you'd need enough income to justify both mortgages.

I'd suggest a visit to an independent broker for this, as you could be up to your ears in criteria trying to find the right lender for the new mortgage.

Wh05apk

Provided your income is suficient then yes, some lenders will disregard the mortgage provided the anticipated rent covers/exceeds it, any shortfall will be deducted as a commitment.

The problem you may have is that lenders are reluctant to provide consent to let on a property in negative equity, also where will the deposit come from?

amillionlittlepieces

My current lender can provide consent to let. I will have the deposit for a new property but would like to keep the other on as a second income as the rents exceed the mortgage payments (ie not use the savings to pay th negative equity)

Thanks guys for your comments

kingstreet

Don't forget the rent is taxable as income, but you can use the mortgage interest (not capital) payments and management fees and other expenses to mitigate the income tax.

When this stops being your main residence, any growth in the price could generate a liability to Capital Gains Tax. You should seek advice about this issue from a professional - accountant or solicitor. Or if you can manage to hold on to your will to live trying to get through, talk to HMRC.

Thrugelmir

richardibarnes wrote: »

My current lender can provide consent to let. I will have the deposit for a new property but would like to keep the other on as a second income as the rents exceed the mortgage payments (ie not use the savings to pay th negative equity)

Thanks guys for your comments

And once the term of consent to let is over and the property is still in negative equity. What are your plans then?

Your solution is only temporary.

amillionlittlepieces

Thrugelmir wrote: »

And once the term of consent to let is over and the property is still in negative equity. What are your plans then?

Your solution is only temporary.

I currently have two tennants in the property and one other living there is a joint owner. Once I move out and i can replace with another tennant then the rents provide a small profit on mortgage payments, which I was hoping to use to pay extra off the mortgage. One of the people who will still be in the property will be one of the owners and therefore the other three will be lodgers.

I'm very new to all this and taxes etc still confuse me

Thrugelmir

richardibarnes wrote: »

One of the people who will still be in the property will be one of the owners and therefore the other three will be lodgers.

Then you won't need consent to let as the property will still be owner occupied.

Possibly though your ability to obtain another mortgage will be impacted by your liability on this property. I'm sure someone knowledgable can comment on this situation.

amillionlittlepieces

Thanks to everyone who replied.

I have received advice from the Mortgage Advice Bureau who stated that if a letting agent could supply a letter (say the agent I'm buying through) saying that my existing property can recover through rent 125% of the mortgage payments, then some lenders would disregard the original mortgage.

Thanks Everyone!

kingstreet

Going back to the taxation point, if one of the owners is living in the property, I think they can rent out a room tax-free up to a certain weekly rent (£65?) although I'm not sure about the remainder of the property if this is the case.

Complicated one. Get advice on this issue.

On the mortgage issue, the only time I've had this I had a client with a house purchased by three friends. My client wanted to buy with his partner and Nottingham BS agreed to treat the current mortgage payment like a credit agreement and they were happy to do that as the income was sufficient to justify the new mortgage on that basis. They did make clear they would never give consent to let on the new one, just in case it was a masked LTB/BTL.