Best reason for remortgage

LondonR

We are planning to remortgage our house in London to buy an additional property in Birmingham. We already enough equity in our house so we could afford to borrow enough to buy a flat outright in Birmingham and still fit within affordability limits on our current house - as far as we can tell.

Our questions are:

1. Is it acceptable to borrow on your current property to buy another property outright? I read somewhere that this would be like taking out a 100% mortgage as we are not contributing our own savings towards the new place as a deposit - it will be financed entirely by the remortgage money.

2. What reason should we give for the new purchase? The main short-term motivation is to have a place near my father so we can support him as he prepares to move out to a nursing home down south. He is currently on a waiting list so we don't know how long this will take.

After he moves down south we would most likely put the flat up for rent - meaning it would have become a buy to let, essentially. So would it be best to tell the bank the latter plan now (that it is to become an investment property) or does it make sense to mention we intend to occupy the flat in the short term instead?

Contemptuous

1. Yes this is fine.

2. It doesn't matter what you tell them. The loan is secured against your main residence, so in effect the other property is of no concern to the lender. If you were to, say, default on the mortgage it would be your main residence at risk.

dimbo61

Any lender will want to look at all the details.
Income, age, equity, credit history, outstanding debts etc
You can offset 100% of the Interest Only part of the mortgage used to buy the flat ( when you let it out)against TAX on the profit you make.
Maybe one for a broker and a Good Accountant so you have a VERY clear audit trail.

Thrugelmir

Lenders may prefer you take out a BTL mortgage on the property you are letting rather than releasing equity. Mortgage lending is priced to buy residential property not to provide cheap sources of finance.

amnblog

There are a number of ways to do this - you can mortgage your current home only, or both properties.

Get yourself some advice from a sensible broker to explore the options.

LondonR

Thanks for everyone's help and ideas!