HSBC - Borrowing more and Consent to let

amsjrt

Hi,

I currently have a mortgage with HSBC, but thinking of buying another property, then sell the existing flat. My problem is that I need to release some of the equity in current property, in order to have the deposit to buy this second property.

I am thinking of following the steps below:

1) Borrow more under the existing mortgage with HSBC. This requires making an application. Current LTV is about 50% but thinking of getting the lifetime tracker of 1.99% which will increase LTV to around 70%. This has a £499 booking fee
What is a sensible reason I should give to HSBC in order to borrow more under existing mortgage?

2) After the I receive the additional amount from (1), I will ask HSBC for consent to let for this property. I checked with HSBC and they only allow this for 12 months. Does anyone knows if happens after 1 year if I still unable to sell it? Can I extend this? What reason should I give to HSBC to do this? Do you think HSBC may reject this as I just borrow more money under the existing mortgage?

3) With the consent to let from HSBC approved, I plan to let this property and earn a rent higher than 125% of the monthly repayment.

4) Buy the 2nd property, using the money raised from (1) as deposit and obviously need to apply a second mortgage. As the rent from 1st property is more than 125% of monthly rent, this should not affect the borrowing criteria for the 2nd mortgage. Is my understanding correct?

5) Once I moved into the 2nd property, I will start selling the 1st property and hopefully can sell it within 12 months.

I am wondering if there is any better or alternative way of doing the above? My situation is that I do not have enough deposit to buy the 2nd property, unless I sell the 1st property first? However, I prefer to buy the 2nd property first before selling 1st property.

Anyone can suggest alternative ways of doing this?

Danny

Thrugelmir

My personal observation

1. Will HSBC agree to the release of equity for the purpose you propose. Lying is paramount to fraud.

2. Will HSBC agree to CTL given they've allow you to borrow money to purchase another property. Lenders have the discretion of add a loading to your interest rate.

3. What if you struggle to find a good tenant

4. If the property is unlet or tenants default. Then you have a liability. This is the starting point for lenders.

5. And if you don't sell it in under 12 months? Your tenants have rights too. May not leave when you wish them too.

6. Focus on selling the property. Reduce the price slowly.

amsjrt

Thanks Thrugelmir for your comments.

I have talked to a few people and it is a common thing that people release equity from existing home before taking the second. I take your point that whether will HSBC be willing to allow borrowing more and then followed by consent to let. Anyone have tried this and being successful?

Regarding the tenant, I already found someone willing to take it for a short period of time so this is not a risk to me and he is flexible enough given that I will be charging a cheaper rent.

I am still keen to buy the 2nd property then only sell the first one within a year. I have explore the market and should have no problem selling it at the price that I am looking for.

Any other alternative suggestions other doing the above steps?

Thrugelmir

amsjrt wrote: »

I have talked to a few people and it is a common thing that people release equity from existing home before taking the second.

That reminds me of something I meant to mention earlier. Will the lender on the second property accept the source of the deposit, i.e. borrowed funds.

amsjrt

Thrugelmir wrote: »

That reminds me of something I meant to mention earlier. Will the lender on the second property accept the source of the deposit, i.e. borrowed funds.

Will this be a concern for the lender of second property?
This is also suggested by a mortgage advisor from L&C broker advisor that I have been talking to, which he suggest that this is a common practice. So I would thought this is a normal thing that many people do.