Borrowing on mortgage free house

jane547

We have 2 mortgage free properties one we rent out, we would like to borrow on one of them to purchase a home for our daughter could anyone advise on the best course of action we do not want to sell them ?

bruich76

You need to know how much the house or houses are worth. Have an estate agent look around and let you know what he or she thinks. Just pretend that you are going to sell.


From there its a case of working how much you need to drawdown bearing in mind that the rates will be cheaper based on the equity you will retain in the property. You can either use a broker or a bank. Obviously, a broker will help you to find the best rates. The bank will send their own surveyor around in any case though.


Process wise, its a case of instructing a solicitor and they will have to ask you all the usual questions as if you were buying or selling it so you will need to complete the property information forms and carry out the usual searches. Some accept indemnity insurance others don't if they do the insurance is cheaper.


Should be fairly straight forward to be honest. Then the mortgage will just get registered against your house by your solicitor following completion of the drawdown.

jane547

Thank you, I have had the property valued and would like to borrow 1/3 of the valuation so I am better to re mortgage as apposed to equity release ?

eddddy

jane547 wrote: »

Thank you, I have had the property valued and would like to borrow 1/3 of the valuation so I am better to re mortgage as apposed to equity release ?

A mortgage will almost certainly be much better value.

But since you're asking about equity release... are you retired/older?

You need a suitable income to get a mortgage, and most lenders won't allow a mortgage to run beyond your 70th birthday.

jane547

Hi Thank you yes we are an older couple 58/62, would the income from our rental property not be taken into consideration when applying ?

bruich76

In theory you could mortgage the buy to let property with a buy to let mortgage. However, this is where a mortgage broker is worth their weight in gold because they will be able to give you advice on which way is better.


I would not go down the avenue of an equity release.


Good thing for you is that the bank are going to see you as good security. Borrowing 33 percent of a property value is no risk at all really for a lender.

SuzieSue

jane547 wrote: »

Hi Thank you yes we are an older couple 58/62, would the income from our rental property not be taken into consideration when applying ?

Yes, it should do depending on the lender, I know RBS take it in to account as I know someone who has just done exactly what you want to do.

kingstreet

This is a BTL remortgage of an unencumbered property.

Under the new PRA rules, you need the rent on the property to be around 145% of the monthly mortgage interest assuming a rate of around 6%.

jane547

Thank you for your response kingstreet, I am not buying the property to rent out I am buying it for my daughter does the remortgage still have to be a buy to let mortgage then ?

kingstreet

I thought you were remortgaging a property you already own/let and using the money from that to enable your daughter to buy a different property?

It's the property on which the mortgage will be secured which is the issue here, not the planned use of the funds you raise...

jane547

Oh I see so am I correct in thinking because the property we own outright is tenanted the remortgage has to be a buy to let ?