Is a second mortgage realistic? (Scotland)

Emmia

akira181 said:

Emmia said:

Why can't your mum sell her existing property, and buy a new one with the proceeds + a small mortgage if necessary?
I don't understand why you're looking to take out a second mortgage.

I'm assuming that my mum being 67 and retired would be a defacto rejection on a mortgage application so it would need to be in my name.  If that's not the case, I would put it in her name.

AdrianC said:

akira181 said:

However, my mother intends to sell her current property (eventually) and put that towards the new place, which should pay off at least 90% of the new place.

So there we go. Problem solved.

She should be able to borrow such a small amount. What's her pension situation?

I think she gets £600 a month on her pension, she was a couple years off qualifying for the full amount but her old employer went under so she decided to retire.

Lover_of_Lycra said:

@akira181 do you further savings over and above the deposit to pay the Additional Dwelling Supplement and LBTT? 

I agree that your mum doesn’t need to decorate her home in order to sell. Have a bit of a declutter by all means but she’s unlikely to see the money spent decorating back.  

Has your mum considered renting instead of buying? Alternatively if with the money she receives from selling her house and a loan from you she can afford to buy somewhere outright that would seem a better and more tax efficient option for the pair of you. 

I'm completely clueless about house buying, nevermind the additional complexities of a second home.  It's my first time hearing about ADS and LBTT, got some more reading to do!  She definitely needs to declutter, the only problem with renting while she house hunts is that we would have to move her stuff into storage until she finds a new place, a step I was hoping to avoid TBH as there would no doubt be breakages along the way.

K_S said:

*snip

@akira181 Setting aside the matter of the cash that your mum can put into the mortgage later on, the current mortgage and upkeep commitments will reduce your affordability significantly. Based on the very limited info in your post, very very roughly speaking you may be able to borrow in the region of 75k or so on a second home mortgage with a 20-25% deposit. Is that sufficient for the house price you are looking at?

If the plan is to sell the house later on after you've got a mortgage and she's moved closer to you, there's no way of incorporating that into an AIP at this point.

Borrowing 75k with a 40k deposit would come up short as house prices around here start in the region of £170K.  I'd expect my mums house to be valued in the region of £150k (nothing official yet, just comparing it to other houses in the area, which are a little smaller) but it's hard to know what the market is like as it's a small island village. 

Is it not possible to use my mum's house as collateral for a larger second mortgage, with the provision that the proceeds from the sale of it would be used to pay back the second mortgage?

What I don't understand is why you're seeking to hang onto your mum's existing property? It just makes things substantially more complicated.

[Deleted User]

akira181 said:

Emmia said:

Why can't your mum sell her existing property, and buy a new one with the proceeds + a small mortgage if necessary?
I don't understand why you're looking to take out a second mortgage.

I'm assuming that my mum being 67 and retired would be a defacto rejection on a mortgage application so it would need to be in my name.  If that's not the case, I would put it in her name.

AdrianC said:

akira181 said:

However, my mother intends to sell her current property (eventually) and put that towards the new place, which should pay off at least 90% of the new place.

So there we go. Problem solved.

She should be able to borrow such a small amount. What's her pension situation?

I think she gets £600 a month on her pension, she was a couple years off qualifying for the full amount but her old employer went under so she decided to retire.

Lover_of_Lycra said:

@akira181 do you further savings over and above the deposit to pay the Additional Dwelling Supplement and LBTT? 

I agree that your mum doesn’t need to decorate her home in order to sell. Have a bit of a declutter by all means but she’s unlikely to see the money spent decorating back.  

Has your mum considered renting instead of buying? Alternatively if with the money she receives from selling her house and a loan from you she can afford to buy somewhere outright that would seem a better and more tax efficient option for the pair of you. 

I'm completely clueless about house buying, nevermind the additional complexities of a second home.  It's my first time hearing about ADS and LBTT, got some more reading to do!  She definitely needs to declutter, the only problem with renting while she house hunts is that we would have to move her stuff into storage until she finds a new place, a step I was hoping to avoid TBH as there would no doubt be breakages along the way.

K_S said:

*snip

@akira181 Setting aside the matter of the cash that your mum can put into the mortgage later on, the current mortgage and upkeep commitments will reduce your affordability significantly. Based on the very limited info in your post, very very roughly speaking you may be able to borrow in the region of 75k or so on a second home mortgage with a 20-25% deposit. Is that sufficient for the house price you are looking at?

If the plan is to sell the house later on after you've got a mortgage and she's moved closer to you, there's no way of incorporating that into an AIP at this point.

Borrowing 75k with a 40k deposit would come up short as house prices around here start in the region of £170K.  I'd expect my mums house to be valued in the region of £150k (nothing official yet, just comparing it to other houses in the area, which are a little smaller) but it's hard to know what the market is like as it's a small island village. 

Is it not possible to use my mum's house as collateral for a larger second mortgage, with the provision that the proceeds from the sale of it would be used to pay back the second mortgage?

Depending on how long ago you bought your current home you might have been subject to SDLT rather than LBTT.  Similar idea though as both are taxes paid when you buy a property.  The ADS is an additional 4% over and above the standard LBTT charges.

When I said rent I meant long term as an alternative to buying if your mum can't afford to buy what she wants where she wants.  What would £170k buy your mum in your area a house or a 1-bedroom flat?

To use the equity in your mum's current home she would need to sell it or mortgage it to release some equity.  One mortgage secured against two properties isn't your run of the mill mortgage product.  HSBC used to offer some of these exotic mortgages, I remember one poster having the mortgage secured against a different property than the mortgage was for but my understanding is that HSBC has pulled these kind of products, at least for now.