Equity to get deposit

Amethyst175_2

Hi

I currently own a house in Northern Ireland with a £28,000 mortgage left.

We are looking to buy in England.

What would be the best way to release the equity in my house (don't want to sell if possible) to use as a deposit for a new mortgage?

Thanks

eddddy

Amethyst175 wrote: »

What would be the best way to release the equity in my house (don't want to sell if possible) to use as a deposit for a new mortgage?

You would get a bigger mortgage on your current house.

You can then use the extra money from the mortgage as your deposit on the new house.

Obviously, the lenders would do affordability checks etc, to make sure you can afford 2 mortgages.

kingstreet

Further advance from existing lender, not universally available for the purpose you want.

Second charge loan is an option if you have penalties if you repay your existing mortgage. Rates will be higher.

Remortgage to another lender to repay current mortgage and raise extra, is most likely route for success.

The_Logans

We tried to release equity with same lender a while back and got turned down. Had to take a 'second charge loan' with higher rate as we were tied into current deal.

waningsleep

Equity Release should be an option very carefully looked at.The interest charged is compounded.That means interest on the interest you will owe.Ask for at least10year future costing before you commit

kingstreet

waningsleep wrote: »

Equity Release should be an option very carefully looked at.The interest charged is compounded.That means interest on the interest you will owe.Ask for at least10year future costing before you commit

In this context, "equity release" is a euphemism for "borrowing more" not using lifetime mortgage planning on an interest-roll up basis.

How did you pick your username?

GDB2222

kingstreet wrote: »

Remortgage to another lender to repay current mortgage and raise extra, is most likely route for success.

The OP didn't say whether he would be letting the house in Northern Ireland, but I presume yes. Would he be better of with a BTL mortgage or a homeowner's mortgage with permission to let?

Amethyst175_2

Thanks. Amethyst is my favourite gemstone lol

waningsleep

Lifetime Mortgage then.Before anyone signs make sure they get a 5,10,15 year forecast before they commit.
I used to be a ballet dancer!

kingstreet

waningsleep wrote: »

Lifetime Mortgage then.Before anyone signs make sure they get a 5,10,15 year forecast before they commit.
I used to be a ballet dancer!

So you are a human being.

I thought you might be some kind of bot skimming the net for "equity release" so the question was a test to see if you replied.

As I said, the OP isn't looking for equity release, they are talking about a let to buy remortgage where they remortgage to a new lender to let their current home while borrowing more to increase the deposit for their new residence.

People don't like to say "I want to use my property like an ATM" so they use euphemisms like equity release not aware there is a completely different product with that label.

As I said, this is a normal mortgage transaction, not equity release and not interest roll-up.

kingstreet

GDB2222 wrote: »

The OP didn't say whether he would be letting the house in Northern Ireland, but I presume yes. Would he be better of with a BTL mortgage or a homeowner's mortgage with permission to let?

You have to assume it's a Let To Buy scenario if they want cash but don't want to sell.

A residential is out of the question if they intend to let and buy a new residence on day one. CTL is for those who live in a property and want to let it without borrowing more.

So, the usual questions apply.

What is the estimated rental income from the existing property?
How much do you want to be a landlord?
Do you understand there is a 3% SDLT surcharge on second properties?
Do you understand less of your expenses will be available to offset so you pay more tax?
What is the estimated value of the current property?
Does your current income meet typical minimum income requirements?

Typically, you'll be able to borrow the LOWER of 75% of the value of the existing property and the mortgage amount equal to the monthly rent divided by 140% at an interest rate of perhaps 6% per annum.

As an example, a property worth £100,000 where the estimated rental income is £450 per month.

75% is £75,000.

£450 / 140% = £321.42 x 12 = £3,857.14 / 6% = £64,286.

So the LOWER is £62,486.

This is pretty typical of the formula since the PRA regulation changes on 01/01/2017.

Then you need to deduct the repayment of the existing mortgage t see what you will have left over.

You need an independent broker to compare your options.