mortgaging against an existing property when I'm currently unemployed

mige55

I'm lucky enough to have bought a city property outright some years ago with money left to me in the family.

For the past 5 years I've let the property out while we've lived in a cheaper rented property in the country. We have a toddler so I haven't been working and have relied on rental income. My partner went self-employed last year.

Now the market seems to be recovering we're thinking about either buying a home here or buying land to build on.

I'm not eligible for a mortgage as I'm currently unemployed and my other half is nearly a mortgageable prospect once his Company has run for a year.

Someone told me recently that it's possible to get a mortgage on a home for us based against my flat in the city. But is that true if I'm not 'working'? I know the bank would not accept my rental oncome as a reliable guaranteed income a couple of years ago when I enquired.

Someone else told me it would be better to get a loan against the property but I dont want to end up with huge interest repayments.

Has anyone else done this and what pitfalls should I avoid please?

PS My apologies if this is a regular or naive question. I did Google for an answer and am not looking to waste anyone's time.

ACG

You can potentially raise a Buy to let mortgage against the property that is let out.

3 things that will be problematic (although not impossible to overcome):
1) You have no earned income other than the rental income.
2) You are not a homeowner
3) Generally speaking you can raise 75% of the properties value on BTLs... would that be enough to go and purchase a property outright?

Assuming it can be done, that could give you a healthy deposit towards a residential property. By the time your partner has 1 years accounts, it might be possible to get a residential mortgage using their income alone - the 2 combined would be the maximum purchase price.

Probably worth speaking to a broker but theoretically it can be done.

mige55

That's amazingly helpful. Thank you so much. This is the first time I've posted on here.

The city property is worth enough (I had a valuation survey done two years ago) to either let us buy a modest place here or - at the very least - to buy land. If it covered a small home here would that negate point 2?

I am looking for part-time work now our daughter has started nursery but it's hard to find work in a rural area so this isn't guaranteed soon and I know that a part-time income often isn't taken into account.

I'll definitely contact a broker to discuss in more depth now that I know it's vaguely possible.

Thrugelmir

Seriously consider selling the City property. Never a good idea to start a venture from a position of financial weakness.

mige55

Thank you and yes, I'm considering selling it now that the market is recovering. I held onto it for income but also an escape strategy if country living didn't suit.

I'm also mindful that after 5 years I'll be starting to encounter capital gains issues if I hold onto it. I asked an accountant to look into it a couple of years ago when the last tenant expressed an interest in buying and was told that CGT would start to increase from next year.

The current tenants moved in 2 years ago though and said they were keen on a long let - they were in the last place for 5 years - so I would probably have to serve notice or it might be a tricky sale!

Thank you so much for clarifying a lot of my thinking.

ACG

Some lenders dont mind you not being a homeowner, non (I know of) whos criteria is that you must be a homeowner would accept that you are remortgaging the property to overcome that piece of criteria - they have no way of knowing you will actually do that and as honest as im sure you are... theyre not going to take your word on it.

Personally I dont see remortgaging a BTL property to go and purchase a residential as a bad thing. The interest can be offset against the income tax from it so to some extent it could be seen as an interest free or reduced interest loan.