Please advise: two people, joint purchase, port mortgage, deposit from buy to let??

rossyl

Hi,

I am so very confused, and would appreciate your help/advice on options and if we can do what we would like to do.

EDITED

Person 1
Homeowner
Property Value = £600k
Current Mortgage with Bank ABC = £145k
Mortgage would be subject to exit fees, so wants to "port" mortgage.
Salary £70k

Person 2
Homeowner
Property Value = £160k
Current Mortgage with Bank ABC (same bank as Person 1) = £135k
Mortgage deal over, now on lifetime tracker
Salary £60k

New Property = £600k





The plan is as follows:

• Person 1 takes out a Buy To Let mortgage for minimum £350k against their property with a DIFFERENT lender - Barclays or Woolwich (we've spoken to both and they're happy)
• Person 1 pays off their current mortgage with Bank ABC using the funds from Buy To Let mortgage.
• This leaves Person 1 with £~200k cash
• Person 1 moves their current mortgage to New Property

• Person 2 sells their property.
• Person 2 pays off their current mortgage using sale funds.

• Person 1 and Person 2 have a joint mortgage over New Property of, in total, £400k with Bank ABC.
• The deposit for New Property is £200k taken from the Buy To Let mortgage from Person 1's property.

Is the above possible?


I have been told that:

- Person 1 and Person 2 cannot use the £200k raised from the Buy To Let mortgage over Person 1's current property as a deposit for the New Property, as this is deemed "capital raising"?


We want to keep Person 1's property due to it's location, strong rent-ability, and consistent rising in value. We also want to buy a new house. Considering the level of equity in that property we thought this would be simple...it's turning out not to be the case.


I would greatly appreciate advice.

Thanks.

Thrugelmir

What's the annual rental value of property 1 ?

rossyl

Thrugelmir wrote: »

What's the annual rental value of property 1 ?

£31,000 to £34,000 a year rental income.

kingstreet

Before we go on, which lender allows you to remortgage to someone else then allows you to port the rate from your now repaid deal to a new property?

I've never come across it before.

I know the Nationwide will allow you to do it when you take out a new mortgage upto six months after repaying the old one, but I don't know if the circumstances I describe in bold are acceptable?

rossyl

With regard to moving mortgages, we've been told that this is acceptable by the lender. They are well aware that a Buy To Let mortgage with a different lender will be taken out on Person 1's property. Due to anonymity, I'd rather not say the name of our lender. Not trying to be difficult.

The main issue here for us, is the "capital raising" point, so I'd appreciate any advice in relation to that.

kingstreet

I'm awaiting a view from the other advisers on here on the likelihood of being able to do that.

I'd also advise you to treat with suspicion anything a lender tells you you can or can't do in a phone conversation.

It's pretty standard on here that you can phone a lender three different times and get three different answers to the same question.

Once I've got a pretty good idea of the porting issue, I'll answer the rest of the queries. In the meantime, I'm out for a half hour.

Conrad

Why is captial raising an issue?

As long as the buy to let lender accepts the reasoning and the rent covers the debt sufficiently, all should be well.

So a simple B2L remo of property 1, and porting the existing mortgage to the new property (I'm assuming you want to do this as the rate FOR THE EXISTING portion is ultra low?).

Existing lenders regularly dole out incorrect info. Make sure you get things in writing up front.

rossyl

Conrad wrote: »

Why is captial raising an issue?

As long as the buy to let lender accepts the reasoning and the rent covers the debt sufficiently, all should be well.

So a simple B2L remo of property 1, and porting the existing mortgage to the new property (I'm assuming you want to do this as the rate FOR THE EXISTING portion is ultra low?).

Existing lenders regularly dole out incorrect info. Make sure you get things in writing up front.

I've just had a call from the Lender, and they've said that they spoke to an underwriter, that we can both port our current deals (we've been told this wasn't possible previously by our lender) (both current mortagges are ultra low trackers) but that we would not be able to use the money generated from the buy to let mortgage as our deposit for the new property!? That this is "capital raising" and not allowed.

Thrugelmir

Then you need to approach other BTL lenders to see if they will release the required equity.

I would you imagine your current lender is looking at a £750,000 loan exposure as outside their risk tolerance.

kingstreet

Is all this stuff with one lender?

The point is, you're taking out a new joint mortgage on the new property. Unless you are both with the same existing lender and plan to have the new joint mortgage with that lender again, porting ain't going to work.

TBH I've never tried to port two rates, one from each person's mortgage to a new joint mortgage either. Anyone else done it?

If this is all with the same lender, I'm going to leave it with them to sort out. My brain hurts.

rossyl

It is not all with one lender, I have tried to make this clearer in the first post.

Both Person 1 and Person 2 each have a mortgage with Bank ABC.
Person 1 will take out a Buy To Let with a third party lender - Bank XYZ - for approx £350k on a property valued at £~600k