Offset mortgage on house asset?

bingobangobongo

Probably a silly question, but I know you can get offset mortgages on savings. But can you get an offset mortgage on an already owned house?

Say you want to buy another home to live in, can you offset your new mortgage based on the value of your existing house.

Assuming you owned the 1st house outright that is!

dwsjarcmcd

Yes you can. I did exactly that a few years ago on a flat I wanted to buy as I was working away from home. It was with First Direct and as it was a small mortgage I chose an offset with no fees.

saverbuyer

I stand corrected.

bingobangobongo

Thanks for responses - after more research it is called "Let to buy" (as opposed to buy to let).

You effectively are remortgaging the house you own in a sense, but you still own it outright.

kingstreet

Can you describe what you are actually trying to achieve?

Is this a cross-charge, with two properties securing a single mortgage?

Offset works in a specific way. Positive interest on savings is used to offset negative interest on debt, leaving a net balance to pay.

A let to buy is a mortgage on a property you already own, used as the deposit to purchase another property, on which you normally need a mortgage as well.

You might be able to find an offset product for the mortgage on your new residence, but I don't know of an offset product for a let property.

bingobangobongo

Thanks for your help.

Say you owned a house outright with no mortgage. It might be with 100k in today's market.

If you want to move house without selling, and buy a 200k house, could you use your existing house as part security, like savings. For example use 50 grand equity.

So you would effectively get a mortgage of 150k for the new house, with the remaining 50k secured against the existing property?

getmore4less

kingstreet wrote: »

Can you describe what you are actually trying to achieve?

Is this a cross-charge, with two properties securing a single mortgage?

Offset works in a specific way. Positive interest on savings is used to offset negative interest on debt, leaving a net balance to pay.

A let to buy is a mortgage on a property you already own, used as the deposit to purchase another property, on which you normally need a mortgage as well.

You might be able to find an offset product for the mortgage on your new residence, but I don't know of an offset product for a let property.

To avoid potential tax on any interest on savings the balances(savings/debt) need to be offset before the interest is charged.

Which lender do it the way you describe?
They expose their customers to a tax liability.

jackomdj

I think king street meant positive BALANCE against negative BALANCE rather than interest...

getmore4less

jackomdj wrote: »

I think king street meant positive BALANCE against negative BALANCE rather than interest...

What else do we have to guess about what kingstreet posts?

getmore4less

bingobangobongo wrote: »

Thanks for your help.

Say you owned a house outright with no mortgage. It might be with 100k in today's market.

If you want to move house without selling, and buy a 200k house, could you use your existing house as part security, like savings. For example use 50 grand equity.

So you would effectively get a mortgage of 150k for the new house, with the remaining 50k secured against the existing property?

That's would need a mortgage on the existing property.

Somewhere along the line you need to raise the funds to pay the person you are buying off.

They are unlikely to be happy with a promise based on your equity in another property.

kingstreet

I was trying to simplify the workings of an offset to someone who seemed to be floundering about what they actually want, by asking questions and providing simple examples.

I realise the tax implications, but it would not have been particularly helpful to further test the understanding of the OP on an issue he was not actually talking about, by overcomplicating the explanation.

In the end, it looks like offset is a long way away from his actual requirement, which is indeed a LTB, or cross-charge.

OP. Your options are as follows;-

remortgage current property to raise funds for deposit on new property, raising balance by mortgage of new property, resulting in two mortgages with a total amount of the purchase price of the new property.

Example - Property A - remortgage for £50,000 on £100,000 value and Property B - purchase mortgage for £150,000 on value of £200,000. This leaves £200k mortgages on £300k of property

or

take new mortgage for total amount needed with one lender, secured over both properties in a "cross-charge" arrangement.

Example - Property A & Property B are security for a single mortgage of £200k, on £300k of property.