Collateral instead of cash deposit for Mortgage?

Quetzalcoatl

Hello All,

I am a Dutch expatriate, live in the UK and do not know much about the British mortgage system/financial institutions and I hope one of you could help me with the following:

We own a small flat in the UK that is rented out for 590 gbp/month. The flat is wholly owned by me and my wife and there is no mortgage on it, value is approx 85,000 gbp. We live in another rented propery.

Is it possible to get a mortgage by using our property without paying a cash deposit and using the flat as collateral?

I am on approx 47,000 gbp/year (Gross) and we do not have any cash in the UK. We do have some cash in euro's but we do not really want to use this for a deposit. (Only if the 1st option is not possible)

We are hoping to buy a property of approx 250-300k and I would really appriciate your help to point us in the right direction if this is possible at all?

Thanks very much,
Quetzalcoatl

chopper78

You can't use collateral - if you buy a £200,000 house and take an 80% mortgage, that means the bank gives you £160,000 but the vendor of the house still wants £200,000 so you need the £40,000 cash to make up the difference.

As you have an unencumbered property, you could probably remortgage that to raise your deposit.

However, if you are on £47,000 a year, you wont be buying a £250,000-£300,000 house. as that is more than a 5x multiple. Aim for something with a total purchase price of around 4x that salary.

If you are non-UK resident, without a UK bank account or a UK credit history, then you might struggle to do any of the above.

holly_hobby

As already stated, you need to exchange actual capital as part of a property purchase.

I am assuming that your income is earned in the UK, and you pay UK inc tax on it ? If so there are a select no of lenders that have circa 4.5 x primary income under 75% ltv.

But to answer your question a traditional mge arrangement can not be simply secured on the collateral of another asset - that would be a commerical (semi or full) arrangement via a banking institution.

Hope this helps

Holly