tricky one advice please

alm721

I wonder if any of you could offer any advice. We are wanting to put in a bid on a property that is being put out to tender. We currently own our main property with a value of around 270K and a smaller property worth around 115K. We were planning on putting in a bid for around 300K on the property we want. The prolem is this. We have a mortgage of 85K which is secured against our main residence but which was taken out to buy the smaller property. We did it this way because we wanted to have the cash to be able to buy somewhere quickly when we saw somewthing we like and it was cheaper than borrowing on a buy to let mortgage. There is no mortgage on the smaller property. We have spoken to an IFA and they have found us a mortgage for around 250K asgainst the property we want to buy should we get it however they have said we will have to change our current mortgage to a buy to let mortgage in order to be able to get the 250K mortgage from the other company. I understand the reason for this but its going to cost us 1300 to get out of our fixed traker (runs out in October anyway but they wont shift on price) The fees on the buy to let mortage to replace the one we have are around 1200 in total so it will cost us around 2.5K just to change to a buy to let. Is there any way around this. Can we say the mortgage ios technically a buy to let even though it not secured agaist the house we let out. (It was taken out for that pourpose) or does anyone have any other advice.

Many Thanks in advance

alm721

can anyone help ?

ginger_nuts

How long does the legal work take to complete ,when you buy a new property . It could take 3 to 4 months .In which case you would be past the October deadline. just get everything in place before then

Gorgeous_George

Firstly, a £270K valuation is notoriously difficult to realise due to Stamp Duty threshholds. Might be more realistic to budget for £250K or thereabouts.

Now, in summary, you want to own two properties with a combined value of £415K and aim to have a mortgage of £250K. That is less than 85% of the value of your main residence so should not be a problem.

There appears to be no reason why you should take out a BTL mortgage and you should be able to port your current mortgage without penalty.

Remember, you can still claim against tax the interest from your residential mortgage as it is the purpose of the loan that matters and not the security provided for it.

Sounds like the I in IFA stands for 'I'.



GG

alm721

Hi there thanks for the replies. Yes we will have a 250k mortagae against the main property but we also have the 85k which we will need to keep on. I think this affects the 85% thing. We intend to keep the 115K property and rent it out for the time being. The issue seems to be the fact that the 85K we currently have is not a 'buy to let' mortgage although it was used for that purpose and is secured against the house we are wanting to sell and I think that on top of the 250K we want to borrow seems to be a problem. I was asking because I was wondering whether we really do need to change to buy to let or whether its just in our IFA's interest to tell us that? We are intending to pay back 150K of the 250K mortgage as soon as we have sold our house so we will just have a 100K mortgage which we would use to extend the property we want to buy.
Hope this is all not too confusing but should we still not have to change if we keep the 85K on as well?
Many Thanks

alm721

ginger_nuts wrote: »

How long does the legal work take to complete ,when you buy a new property . It could take 3 to 4 months .In which case you would be past the October deadline. just get everything in place before then

thanks for replying unfortuatley becuase the house is up for tended there are only a set number of days in which to complete and this is before October

silvercar

You need to port your existing mortgage to the property you wish to buy, this should mean that you won't pay redemption penalties, then you increase this ported mortgage with the same lender.This won't give you enough money, so you take a BTL (actually let-to-buy in your case but same product) on the let property to release some of the equity in your let property to further fund your purchase.

In summary, arrange a new BTL mortgage of say 85k on the 115k let property.

Port (ie transfer existing) 85k mortgage on your home to the new property at the same time as taking extra lending from the same mortgage lender to meet your requirements.

Your broker should be able to arrange the BTL easily, I don't see why he can't sort out the new mortgage and asist in the porting, unless you are with a lender who doesn't deal through brokers.

TTMCMschine

"I was asking because I was wondering whether we really do need to change to buy to let or whether its just in our IFA's interest to tell us that?"

I think the real question is do you really need to buy another house. Have a look at my post "Housing market about to implode" & then maybe you might want to wait for a month or 2.