How do you get two mortgages?

mayb_2

This is a bit complicated and I have posted it before but with no replies so am trying again as a new thread.

One person owns a house worth approx £175,000 (may be more) - on which he owes £125000 on a fixed for 10 years mortgage at 5%. It will cost around £5000 to get out of this. The mortgage could be moved to a second property without penalty if the first one was sold.

This person wants to bring his brother into the mortgage on this property so that they share it. The brother can raise about £86,000. He could cover the repayments on this at 5.5% over 25 years. Possibly could raise more but would have to spread the cost some way in order to afford it. He would then live in this house. He has no deposit.

The first person wants to buy another house as well with a partner at a value of around £220,000.

Anyone got any suggestions as to the best way to achieve this. The first person can afford to repay the mortgages on both of these houses (after deducting the repayments on the £90,000 which will be covered by the brother) and will be buying the second house with a partner.

Is there any stamp duty to pay on the first house as it is already in the name of one buyer? Can responsibility for the first mortgage be limited to each persons share of the mortgage in some way?

Is it better to try to do a deal with one mortgage company or would it be better to split between two separate providers - one for each property?

How do you keep the costs down for solicitors fees etc.

Do you have to pay a fee to reserve a mortgage if you can take it on straight away (for first property)?

The existing mortgage company on the first house will not allow two separate mortgages for one house. They are suggesting that we as the parents buy part of the house outright using equity on our own property and the brother owes us? We are not prepared to do this as it limits our own choices of moving, downsizing etc.

We are prepared to act as guarantors for smaller mortgage.

What would you do? What would you reccommend? Any new thoughts?

Any comments would be welcome. Anyone already done anything like this?

Thanks for your time.

swebber

May not be much help, but your son who has the house and wants to get the 2nd property, will need to make sure that he has the approval of his first Mortgage company before he can get a second one.

To not do so is apparently fraud, so needs to be dealt with carefully.

Indispensable_Hobbes

Each one would have to be one of the persons main residence to get both residential I think or they may have to get a residential and a buy to let.

mayb_2

Thanks for that swebber. Do you mean he must get the approval to take out a new mortgage or to change the first one? The provider of the second mortgage will be told about the first property and the mortgage on it, but also that there will be a second party paying towards it. Will that cover it or is there more to it than that?


He has gone to two financial advisors. The first one holds his first mortgage and is prepared to loan him enough to pay for both properties but wants us (the parents) to put £90,000 of our money into the first property.

The second one has come up with some deal by which he buys the first property with his brother and the second one on a buy to let mortgage. However, he must raise £30,000 deposit somehow to put down on the second property.

I can't see why he cannot add his brother to the deeds of the first house and then his brother pay him 'rent' to cover his share of the mortgage on that one. He could then apply for a mortgage on the second house declaring the 'rent' as an income toward paying both mortgages. Nobody has come up with that solution - is that because there is a reason it can't be done or does one mortgage have to be a buy to let?

Sorry to pick your brains but it is all so confusing and I don't want them getting into trouble like the fraud you mentioned or either of them getting in over their heads. It looks like a good way for each brother to help the other one out to buy a house.

mayb_2

Thanks jennyking - that is ok because each brother would live in one of the houses - no subletting or anything like that.

Indispensable_Hobbes

Perhaps you can raise the issue of a guarantor?

Am i right in thinking its:
Man 1 and brother on one property
Man 1 and Man 2 on the other?

Ian_W

I saw it the first time around but it's so complicated I think that's why folks shied away from answering but this is a tiny bit I believe I can answer, which is:

Can responsibility for the first mortgage be limited to each persons share of the mortgage in some way?

I don't believe so. I've only ever heard of joint mortgage holders being "jointly and severely" responsible. If the mortgage is defaulted on the lender can repossess the property, having that security makes mortgages generally cheaper than unsecured loans. A lender couldn't repossess 50% of a property so I can't see a way they would allow that.

You may already have thought of this but wouldn't it be possible for son 1 to sell to son 2 with you acting as guarantor to son 2's mortgage? If you do it the way you're thinking of son 1's earnings are going to have to be quite high to get a mortgage on property 2 with partner and a mortgage on property 1 with his brother.

mayb_2

Jennyking it would be son 1 and son 2 on first house (owned by son one at the moment) and son 1 and his partner on the second house.

We can gaurantor son 2 for a mortgage but then son 1 would have to repay that mortgage and start a new one with a £5000 fine for doing this during fixed rate period. He would be prepared to do this if we could find a way of getting both mortgages.

It is not possible to have two separate mortgages on one house as far as I can tell.


Ian W - I know - I can't tell you how many times we have come up with a good idea only to realise we forgot to take something into account.

Son 2 cannot afford to buy a whole house and son 1 cannot sell the house at half its actual value aparently this is not allowed. We thought at first it would just be a question of son 2 raising about £86,000 giving it to son 1 who would use it as a deposit on the second house.

Son 1 does earn good income and will be buying with his partner who earns full time as well (at the moment anyway). Son 1 works from home and has two children (partners family) and wants another child. For this reason the house he is in at the moment is far too small (first property). He could just sell up and buy a second house but wanted to keep the first one as an investment for a pension as he is self employed. He also wanted to help his brother to get on the property ladder and this could be good for them both.

Houses round here are dear and there is no real option to move to a cheaper area for either of them because of jobs etc.

I hope if people keep posting it can be sort of thought through on line and pooling of ideas may pop up an answer. Thanks for chipping in, all thoughts are very welcome.

danjberry

sorry a bit late and only skimmed through but why not have son 1 port his mortgage to property 2 and live with his partner. have son 2 buy the first property on his own with son 1 standing as guarantot (f his income allows it) and then get a solicitor to write up a deed of trust or restriction and second charge on the property stating son 1 owns a certain % of the property. the only thing with this is stamp duty will be applicable and legal fees higher due to the second chagre/deed of trust/restriction

mayb_2

Danjberry thanks for that and I will certainly look into it. It may be possible for us to act a guarantors for the loan for son 2.

The problem as I understand it is that son 1 cannot sell the property to son 2 at significantly less than its market value. This means that son 2 must raise about £150,000 (if they would allow that this is still a sale and not a gift if you get me) This means very expensive mortgages because of ratio of loan to value.

How does the guarantor thing work? Is it possible to borrow more than your income allows if you have a guarantor for the loan?

Would it be cheaper for both boys to use the same loan company or would they perhaps get a better deal by looking separately at this do you think?

ps Hope you got some sleep.

danjberry

i would say use whatever company has the better deal, as long as all the information is decalred before hand i cannot see any problems.

The Guaranot thing works as they can use all/part of the guarantors income after all financial commitments have been deducted.

Just another question is son 1 happy to accept £86,000 for the property and split the property 50/50 or is the split different. As he can carry out a Transfer of equity on property 1 meaning both son 1 & 2 are on the mortgage and deeds and then son 1 can get another property with his partner with a whole new mortgage, but the mortgage amount for property 1 will be deducted from his accessible income. i.e if the mortgage is £500 a month then £6000 will be deducted from his annual salary when he goes for a mortgage with his partner. if his income can allow that then i am sure some lenders will accept that as long as you state the mortgage he owns with his brother is just to help him get on the property ladder, i completed a couple of mortgages like that at a lender i previously worked at. Maybe he would be best speaking to his current lender regarding this as there may be a bit more give due to existing customer and all.