Purchase & refurb - 2 residential mortgages?

Moneycat

Dear Forum members

Is it possible to obtain a residential mortgage to purchase a 2nd property whilst keeping the current property (also mortgaged on a residential rate).

We have seen a house that we'd like to purchase but it needs refurbishment. Our plan was to obtain a mortgage for it whilst living in our current home until works are complete. Once finished, we would either sell our current home or rent it out (and convert it to BTL).

On speaking to the EA's mortgage broker, they told me it is not possible to have 2 residential mortgages, and that we would either have to buy the new property with BTL mortgage or remortgage our current property to BTL from the outset.

Neither scenario would be true - we will move to the new property once works are done (so it will not be a BTL) and equally if we are living in our current property whilst doing the refurb that clearly is not BTL either!

The above scenario must not be uncommon - so how do people do it?

Or could we just tick a box in the new mortgage application to say that we will be living in the new property? Confused.

Simon_gloster

Affordability will based on you servicing 2 mortgages.

Technically the new property will not be occupied as your main residence from outset. However it could be treated as a 2nd home but LTV will be restricted to 75-80%.

You also won't be able to port your existing rate, or unlikely to.

Moneycat

Thank you. I've done my calculations based on 80% borrowing.

Now, another question - would I have to go to a specialist lender or can any high street bank treat the new loan as a 'second home' loan status? Affordability should not be a problem.

Simon_gloster

Not specialist lending, however most are 75% and not 80% max LTV. Residential rates are available however lender restrictions due to LTV may mean you getting not the lowest rates by done distance.

holly_hobby

Its not that you can't have 2 or more residential mortgages, the issue here is that if the 2nd property (which is not going to be a BTL), is in close proximity to your current home i.e obv not a 2nd residence in another town etc, or for a family member, it will ring bells, as who needs 2 homes in the same town both to equally reside in ? And especially when the valuer goes round, and its obvious that the loan is actually to source a refurb/developement exercise (which is technically commercial finance with the intention to resell) - which is why you won't get on a straight resi with the majority of lenders - and is where your adviser is coming from (although he's got it a bit back to front as to why you'll struggle).

There are solutions, but you will need a specalist refurb lender such as Buildstore, which have various schemes that will suit. Here's their renovation scheme -http://www.buildstore.co.uk/finance/renovation.html

Or, if you do intend to let, you could consider a light refurb BTL mortgage (consider The Mortgage Works) .

Obv, your income will have to be sufficient to service both mortgages at outset (ie whilst not let).

You need to speak to a whole of market broker (as I doubt your EA adviser has the experience or access to suitable solutions).

Hope this helps

Holly