Mortgage-free. Can I release equity to buy new residential home without selling?

havingaball74

Hello,

I am mortgage-free on my current house. I have bought a new, larger house, with my partner. He has put down the deposit.
Rather than sell the house to match his deposit, I was hoping to remortgage the house, release the equity and then let my house out.

I now realize that the best thing to do would have been to save for a deposit rather than becoming mortgage-free as the deposit for the new house is tied up in property.

Anyway, what can I do?

Thanks in advance.

ThePants999

I'm a little confused. If you've already bought the new house, what do you need a deposit for?

havingaball74

I want to match his deposit. Only he has put a deposit down. In order to lower the new mortgage balance I wanted to match his deposit so that we are equal. We want to have 50/50 deposit in the new house but all my money is tied up in my terraced house which I solely own.

Old_Git

you need a buy to let mortage for your house.
If the new house is jointly owned and you complete after April you will have to pay 3% extra stamp duty as you already own a house

havingaball74

We have completed on the new house this week.
We are living in the terrace house until I release equity by
A) selling it.
getting a buy-to-let (or is it let-to-buy)?
Then I will match my partner's deposit.
Basically, I didn't know what to do with house 1 and we wanted to avoid a lengthy chain.

Person_one

Do you want to be a landlord? With all the responsibilities, commitments and financial risks that taking on the job entails?

If not, get it on the market!

G_M

So
* you soley own a terrace house, mortgage free
* you and partner jointly own a larger house, with a joint mortgage. Your partner paid the deposit (£X,000 which represents Y% of the purchase price.)
* you wish to make a one-off payment of £X,000 (to match your partner) and reduce the outstanding balance of the mortgage

So

1) go and see an independant mortgage broker and ask for a BTL (LTB) mortgage on the terrace, for £X,000 + £5,000 (or some other amount).

2) pay £X,000 towards you new residential mortgage

3) keep the £5K aside as a contingency for your letting business

4) research being a landlord

5) Let the terrace

Now read:

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

havingaball74

Thanks all.
If I rent the house out then I would use a letting agent which, hopefully, would reduce the hassle (naive?). The other option is to sell and put the rest of the cash in a medium risk income portfolio (but there are fees and risks there too). Time for a long hard think...
Thanks again.

slopemaster

havingaball74 wrote: »

If I rent the house out then I would use a letting agent which, hopefully, would reduce the hassle (naive?). .

A little, yes.
As you are still responsible if they don't do everything right with deposit protection, 'right to rent' checks etc etc
And as their interests (new tenants every 6 months = 2 new sets of fees) may not be altogether aligned with yours (good long-term tenants).

Person_one

havingaball74 wrote: »

Thanks all.
If I rent the house out then I would use a letting agent which, hopefully, would reduce the hassle (naive?). The other option is to sell and put the rest of the cash in a medium risk income portfolio (but there are fees and risks there too). Time for a long hard think...
Thanks again.

As landlord, the risks and responsibilities are still ultimately yours.

If there's a long void between tenants, its you that loses money.
If tenants trash the place, its you that has to pay to sort it.
If tenants need to be evicted through the courts, that's up to you.
All maintenance and insurance costs are on you.
If the tenants aren't happy with the letting agent, they'll come to you.

Its a job, a business, and you can see from loads of threads on this boards the various issues that can crop up, as well as the impact that having an amateur unprepared landlord can have on tenants and their lives. Its not something you should just fall into or an easy alternative to selling up.

onlyroz

We briefly let out my husband's old flat when we bought our current house and it was a horrible stressful experience. I'm not saying don't do it but you should do your research.

Another thing to consider is whether your old house is in a good area for renting. If not, you could consider selling it and buying another property in a more suitable area.