Mortgaging one house to buy another

slopemaster

Just sort of thinking aloud here so please don’t jump on me for being stupid…

I’ve seen a house which needs very substantial work and would not be mortgageable; I am thinking round whether it would be possible to buy this and do it up, but would need to raise some money…

I own a house which is mortgage-free, and if I could get a 75% (or even a 60%) mortgage on that, it should raise enough money.
Is this even ‘allowed’? To raise money on one house at a ‘normal’ mortgage rate, in order to fund what would be basically a business venture? Will they ask what I want the money for, seeing as I already own the house mortgage-free?

Then my problem is that I probably (or almost certainly!) don’t have enough income to persuade a lender that I could afford the payments.
Is there any chance at all that they would give me an interest-only mortgage, with selling one of the houses as the potential repayment vehicle?
And is there any chance at all that they would accept “I have a lump sum in the bank enough to pay 3 years of payments. And long before that I will have sold the done-up house and be able to pay off the mortgage” as evidence of ‘affordability’?

I’ve got a feeling it won’t fly.
Or is there anything else which might be possible?
(Other than a very expensive and hard-to-get commercial loan?)
How about if I took out a BTL mortgage on the one I already own, and used the rental income to pay an interest-only mortgage? Would that be more likely to work?

Thanks for any advice – I’m just at the early stges of thinking this through

Meeper

In essence, what you want to do is fine.

Then you move on to issues of affordability, and you are quite right in your statement that having 3 years worth of repayments in the bank wouldn't fly.

You can't take out a BTL mortgage on your residential property. That's called mortgage fraud. Go directly to jail. Do not pass Go. Do not collect £200. If the property that you own and you are talking about is already a rental property (not your home) then it's perfectly reasonable to raise a BTL mortgage on it and haev the rental payments cover the mortgage. This should be fine.

slopemaster

Thanks for that.
No, I don't want to fiddle anything - I'm currently living in the house I would be mortgaging, but it is on the market to let and I have somewhere else to go if it does let. Just trying to figure out the best approach.

(Unfortunately, it seems they've accepted an offer on the house I was interested in though - what a shame.)

silvercar

How about if I took out a BTL mortgage on the one I already own, and used the rental income to pay an interest-only mortgage? Would that be more likely to work?

You could do that if you really did rent it out. You would have to move out on or before the time you took the BTL mortgage on it. So you really would need to get tenants and for them to pay the rent that you could use to pay the mortgage.

Where would you then live?

Could you afford to pay the BTL mortgage and make the other property liveable?

If you could, once the second property was mortgageable you could get a mortgage on that (residential if you were going to live in it).

A lot of borrowing, so you need to be confident on your figures.

slopemaster

silvercar wrote: »

...You would have to move out on or before the time you took the BTL mortgage on it. ...Where would you then live?

Either with my OH, or in a caravan on the site of the fixer-upper house. Or a bit of both.

silvercar wrote: »

Could you afford to pay the BTL mortgage and make the other property liveable?...
A lot of borrowing, so you need to be confident on your figures.

I think so. But it is a lot of borrowing, and a big project. Perhaps too big for me. Fantastic house - but it has asbestos, all the lead has been stripped from the roof, etc etc...