Debt Consolidation & re-mortgage

DjKlG

I'm wondering if the following would be possible and if most lenders would approve of it or it would be just a select few?

We would like to remortgage our main property to allow us to consolidate all of our current debts and have just the one payment. We currently have an interest only mortgage on our property for just under 60k (£59,687). The property is currently valued at approx. £350,000.

The other debts we would like to consolidate are two further advances against our property totalling £17,500 and the potential stumbling block, a buy to let mortgage of £108,500. The current value of the buy to let property is approx. £130,000.

We have £42,000 from an endowment policy to put into this and so would need to remortgage for £144,000.

There are no penalties for ending either mortgage. We have never missed any payments and have a joint income of approx. £53,000.

Would this be possible?

Thanks in advance for any assistance given.

Dj

Dogslife4

Hi Dj, what is your motivation for repaying the buy to let mortgage using an extension of your residential mortgage? You should consider the tax implications of this - as currently you can offset the interest charges from your buy to let against your tax bill from the rent you receive. You'll likely lose that tax benefit if you roll that debt up into your residential mortgage.

DjKlG

Hi Dogslife4,

The buy to let mortgage is currently on an interest only basis and so needs changing to start paying it off. The rent we currently receive just about covers the mortgage. If we were to consolidate all debts our monthly outgoings would be reduced, and the intention would then be to make overpayments on the new mortgage.

I'm far from an expert in this field and so could be looking at it from completely the wrong angle! Perhaps just taking out a small mortgage on my residential property and finding a repayment buy to let mortgage is the right way to go? Our thinking was that we would be able to achieve much better repayment rates against the residential property rather than the buy to let rates?

Thanks,

Mortgage_Mark

Hi Dj

Try and prioritise your goals for the mortgages.
Your home or the loan should be first , why not put the endowment money straight to the one which is costing highest rate . If the rate you are paying is higher than bank rate it's a no brainer.

Btl
Banks typically look for 125% of mortgage payment for the rental , on the face of it if your are just paying the rent on the btl . The rent is to low and might need reviewing or the btl rate is to high .
Best of luck

Thrugelmir

DjKlG wrote: »

The buy to let mortgage is currently on an interest only basis and so needs changing to start paying it off. The rent we currently receive just about covers the mortgage.

Might as well liquidate the BTL and release the equity left to settle (the majority of) your debts.


Use the endowment to pay down your residential mortgage. It's on an interest only basis. So you'll need a repayment vehicle if you were to remortgage.

getmore4less

Dogslife4 wrote: »

Hi Dj, what is your motivation for repaying the buy to let mortgage using an extension of your residential mortgage? You should consider the tax implications of this - as currently you can offset the interest charges from your buy to let against your tax bill from the rent you receive. You'll likely lose that tax benefit if you roll that debt up into your residential mortgage.

If done properly the tax relief will still be available.

The key here is does/will the letting business make any money.

if the rent is only just covering the interest only mortgage payment when you factor in the other costs it is probably losing money.


A rate reduction(BTL->residential) may help the cashflow.

getmore4less

What rates and payment terms are the current debts?
What's the rent?

DjKlG

Hi getmore4less,

Residential Mortgage - £59,687.10 - 2.29% Lifetime tracker (+0.29%), interest only
Further Advance 1 - £14,487.50 - 2.5% Base rate, repayment
Further Advance 2 - £2,965.13 - 2.5% Base rate, repayment
BTL Mortgage - £108,366.51 - 4.79% Variable, interest only
Rent on BTL - £520 p/month - agent fees = £454.48

There are no penalty clauses on any of these

Thanks,

getmore4less

Gross yield on the rental 4.8% after agent fees 4.2%

that's really lousy for a rental business and will be losing money when you factor in all costs, it's a HPI play, review required.

you are going to struggle to better the residential rates on those bits and worth keeping the £60k on base +0.29 I/O tracker.

Might be worth looking at another further advance at a lower rate and use the endowment money to reduce the high rate borrowing.

get advise on retaining tax relief

AnotherJoe

So your BTL is essentially losing you money ? And any rise in house prices you might be counting on is most likely cancelled out by all the interest you are paying on your loans.

BTL isn't the panacea so many amateur landlords seem to think it is, Sell the BTL, pay off as much of your loans as you can and change your life style so you don't fall back into debt again.