Equity Release from Property

uknowme

MWT said:

CSL0183 said:

I guess it then comes down to whether you can afford a £380k mortgage? More difficult if you are single, you would have to be earning in excess of £100k pa and be young enough to take on a large mortgage over a long term?

... and don't forget the plan to create two flats out of the property and rent one to help with the mortgage costs...

This is not looking much like a standard residential mortgage proposal...

The Flats were going to help me generate more income to help towards the mortgage, going forwards the missus plans to get back into work once the kids are in school. Still some time to go ( 2.5 years)

dunstonh

uknowme said:

MWT said:

Highly unlikely that the typical 'Equity Release' products are going to be appropriate just based on the amount required to be released and the intended purpose... ... but more details will clear that up for sure.

Sorry I wasn't sure what I needed either I was guessing it would be an equity release. I do not wish to sell the house if I can help it.

In which case, it is not equity release you are looking for as you are too young.  You are looking at secured loans or a further advance (which is a secured loan)

CSL0183

uknowme said:

CSL0183 said:

£650k property with a £55k debt, leaves £595k. You then want to borrow £325k from the house so all in all you need £380k for everything. (£325k + £55k)

Borrowing £380k against a house at £650k would leave you with equity of £270k so your LTV would dip in below the 60% LTV band which would mean you should secure the best rates. 

I guess it then comes down to whether you can afford a £380k mortgage? More difficult if you are single, you would have to be earning in excess of £100k pa and be young enough to take on a large mortgage over a long term?

Hi, Thanks for the detailed breakdown, so basically yes that's what I need for the clean slate. I have partner but she is a housewife. So income on that end but I was thinking about adding the rental income from the flat. Would that work?

I would say you would need to remortgage to do the work first, get the flats in order and settled and the income from the additional flat coming in first. Then to look at the 2nd option in a couple of years time to release the big chunk of money for the siblings. 

There’s the whole landlord thing to consider also, rental income being taxed and not fully offset against mortgage costs etc. 

If I’m being honest; what you are asking is a very tall ask and although I may be wrong, I would say your plan is nice on paper but a step too far for the lenders based upon your income. 

Don’t get me wrong, you’re in a very fortunate position, you have a lot of £££ tied up in the house and it’s a great position to be in. I just can’t see how you can stay in a £650k house and keep everyone happy though I’m afraid. The sensible option would be to sell the house, pay the siblings and any debts and have a huge deposit for something else and start afresh. 

Good luck. 

MWT

uknowme said:

The Flats were going to help me generate more income to help towards the mortgage, going forwards the missus plans to get back into work once the kids are in school. Still some time to go ( 2.5 years)

The problem you have is you can't take a residential mortgage on a single dwelling and then convert it into flats and rent one of the flats out without bumping up against several conditions of the residential mortgage, and you certainly can't get an additional £285k out to pay off your siblings on your current income, nor can you use the potential rental on the flat within the confines of a residential mortgage.

I would suggest speaking to a mortgage broker with experience in buy-to-let and development finance as there is possibly a route that gets you to where you want to be, but it is complicated and it isn't likely to be cheap.

Just as an example of the steps involved take a look at this link, it is not a recommendation for the firm, simply a good layout of the steps involved in what you are contemplating...

https://www.charcol.co.uk/news-and-opinions/ask-the-mortgage-experts/converting-your-house-into-flats-5987/

Your siblings would have to agree to wait some time I suspect though, there is no way you could buy them out first, so if that is a showstopper best to think about selling perhaps...