Getting a second mortgage... What are the rules?

Squirrel1980

Me and my partner are looking to buy a house together.

I have owned a flat for nearly 10 years which has only just come out of negative equity but would only make a slight profit. My partner owns a house which he stands to make a 30k profit on.

We both have secure jobs earning £25k a year, we're 34 years old and have a baby. We need a bigger house!! We have a £10k deposit.

Due to my flat not really being a viable profit maker at the moment we would like to explore the option of me keeping my flat, my partner selling his house and us both being named on the mortgage of the new house.

This also means my flat could potebtially stay as a little pension plan for us when we're older.

1) Is it ok to be mortgaged on more than one property?
2) is it a legal requirement that the other property has a Buy To Let mortgage?
3) would a mortgage company consider my flat a good thing (ie collateral) or a bad thing (pre-existing debt) when it comes to being named on a second mortgage?

ThisTime

Someone who is more in the know will hopefully reply but my understanding is
1) yes it is, if its a buy to let mortgage that is rented out and the rent covers your mortgage is makes no difference on your new mortgage

2)yes and you need permission of your lender to rent out it.

3)as question 1 , makes no difference if tenant is in and paying rent.

Squirrel1980

Ok, so say i get named on this second mortgage, what if I just leave my other property empty or just stay there a few months of the year? Would I have to get a buy to let mortgage if I'm not letting it out? I'm just thinking of these people who have a house in the city and a cottage by the sea.... Do they have a buy to let mortgage on one of the properties??

Or... What if I decide to let it out on a private cash in hand basis and don't get a buy to let. If the other mortgage is with a different company, do the two companies talk to each other... Would they ever find out?

ThisTime

If you don't have it tenanted/on a buy to let they will take your mortgage payment into account when they look at how much you can borrow, you will be eating into your borrowing potential.

Why don't you want it on a buy to let mortgage ? You need to just even for insurance purpose

ThisTime

If you think the banks, taking into account your outgoings on mortgage will lend you enough you could look into it.

Managing a rental property is easy when you have a good tenant.. its so worth having a management agent in place though in case you don't have a tenant that pays or refuses to leave. I pay about £40 a month in management fees on my rented property and i wondered what i was paying for, when i had a bad tenant though they earn every penny i have ever paid them

Thrugelmir

Squirrel1980 wrote: »

Due to my flat not really being a viable profit maker at the moment we would like to explore the option of me keeping my flat,

In that case it would be better to sell it and cut your losses. Better ways of saving for a pension than a property that will cost you money.

Once the flat is sold , then sell the house. Keep financial affairs simple. Making them complex may rebound in the future.

Squirrel1980

I don't think I own enough of the flat to have a buy to let mortgage, even if I wanted one (with my current lender anyway).

ThisTime

Give your lender a cell. If you our transferring the original mortgage to a btl then you won't need same deposit as you would buying a property for btl

Would the rent cover the mortgage?

Squirrel1980

Yes the rent would easily cover the mortgage so that isn't a problem. When I looked into it before I couldn't get a BTL mortgage because the LTV wasn't good enough. Might be better now though.