Buying a new build flat rent current home and get a second (?) mortgage

myl

I have learned so much from this forum when I bought my first home. Now I am thinking of moving home. I have been reading lots of posts on a similar topic on this forum. I plan to speak to a mortgage advisor on Monday, but it would be great if I could get some ideas and advice here before the meeting. Sorry the post is a bit long.


Current home has a mortgage about 25% of the estimated value

• Remortgaged in Feb
• Current term ends in 3 years with an ERC

The new build flat is in an office-converted block, not high-rise, conversion will be finished in Oct.

• Savings enough for a 90% deposit, the 2nd home stamp duty, land tax and the lawyer fee.
• Need to apply for a mortgage about 4 times of annual pre-tax salary.
• No debts and never missed any payment in the past 10 years.
• If asking for some gift money from family, I would be able make an 85% deposit and pay the SDLT. But really prefer not asking.

I am not planning to sell my current home. I am thinking of asking my current mortgage provider for a consent to let; and then rent it out.

• The potential rent is much higher above the interest cost even at a 10% interest rate.
• When there is no tenant, covering the cost (e.g., mortgage monthly payment, council tax and insurance) will not be a problem.
• From reading the posts in this forum, I understand that there will be a lot of responsibilities of being a landlord, possible extra income tax due to rent received, capital gain tax from selling a second home, BTL may not be a good investment.

I plan to live in the new flat as my main residence for at least 5-6 years and then move back to my current home, and rent out or sell this flat.
Could anyone please give me some ideas on:

1. Will this be considered a second mortgage on a new build flat?
2. Is it at all possible to get a mortgage with 90% deposit in my situation?
3. Can I borrow some money back from my current mortgage to increase the deposit and pay the SDLT?
4. If the answer is yes to Q3, how to do it? I called the lender and I was told I can borrow money back for a new car, or making extension to the current house etc but not for part of a deposit of another property.
5. Anything else I need to consider?

Many thanks for reading.

ACG

I am assuming you mean you have a 10% deposit, potentially can be stretched to 15%?

Does that also mean your current home has 25% Equity not 75%?

There are not many lenders who will do 90% LTV on a new build flat, probably less who will do Let to buy in the background. I think you will need a broker for this.

1) Difficult to answer this.
2) Potentially, but your options will be very slim.
3) As per my question above, if you are at 75% probably not. If you are at 25% then probably. However, it would probably need to be a secured loan as your current lender will not do it.
4) As per Q3.
5) A Mortgage broker.

myl

ACG wrote: »

I am assuming you mean you have a 10% deposit, potentially can be stretched to 15%?

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yes, that is the case

Does that also mean your current home has 25% Equity not 75%?

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75% equity? As the mortgage left to pay is <25% of the market price.

There are not many lenders who will do 90% LTV on a new build flat, probably less who will do Let to buy in the background. I think you will need a broker for this.

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thank you, that is what I think.


1) Difficult to answer this.

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I know, was thinking just in case someone might know something...

2) Potentially, but your options will be very slim.

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at least you are not saying absolutely no hope there ...
3) As per my question above, if you are at 75% probably not. If you are at 25% then probably. However, it would probably need to be a secured loan as your current lender will not do it.

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the outstanding balance of the current mortgage is <25% of the market value of the house.
4) As per Q3.
5) A Mortgage broker.

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hope can speak to one tomorrow

Many thanks for reading my long post and asnwer all my questions!