Second mortgage after separating

csswiift

I purchased a property with my partner 18 months ago on a 60 month term. We’ve now separated and decided to rent the property out rather than paying an early redemption fee if we sold.

I’m now looking to purchase another property for myself and have a 10% deposit, but wondered how a lender would treat this? Are there lenders who would lend on a second property with 10% deposit?

Thanks

Newbie_John

Firstly, you're probably not even allowed to rent that property as the mortgage you have is not a buy-to-let property.
And that complicates situation further..

Hoenir

On a personal level. Biting the bullet and paying the redemption fee might be the best option. At least then you can both go your separate ways. Financial associations with ex partners can often end being problematic. 

csswiift

Newbie_John said:

Firstly, you're probably not even allowed to rent that property as the mortgage you have is not a buy-to-let property.
And that complicates situation further..

And secondly, actually answering the question?

amnblog

A few considerations here.

The new Lender for the purchase will most likely want to see you have consent to let from the current lender.

If the rent covers the mortgage costs that is good, if it does not it will impact on your affordability for the new purchase.

The new Lender may have a problem with the deposit size (depending on the Lender chosen).

Finally you will pay an extra 3.00% stamp duty land tax on any new purchase in England.

A case for a mortgage broker.

Flugelhorn

csswiift said:

Newbie_John said:

Firstly, you're probably not even allowed to rent that property as the mortgage you have is not a buy-to-let property.
And that complicates situation further..

And secondly, actually answering the question?

well when you have discussed with the mortgage company if they will allow you to let and  maybe charge you more interest, then sit down and do the sums to see how much income (after expenses) this will bring in + factor in the hassle of being a landlord. Then discuss with a broker re the new mortgage - probably totally depends on income including any from the letting business. 
you have 10% but guess you might need more saved in case there are any expensive repairs needed at the rental property

TBH - just pay the redemption fee and go your own way 

Newbie_John

csswiift said:

Newbie_John said:

Firstly, you're probably not even allowed to rent that property as the mortgage you have is not a buy-to-let property.
And that complicates situation further..

And secondly, actually answering the question?

As things stand it's not possible, to get a new mortgage you need to prove that you have a consent to let for the other property - this could cost higher interest rate, extra fees, or can simply be rejected - depending on a bank - then the only other option is to remortgage to BTL - but that would require you to pay the fee you're trying to avoid.

Once that's sorted out, it's back to affordability. So this is the answer really, it can be done. 

CSL0183

Considering you are going to get stung with an additional 3% Stamp Duty charge if in England, 4% in Wales or a colossal 6% in Scotland on top of normal stamp duty charges along with converting to a BTL mortgage and all associated costs I think you would be wiser paying the ERC and selling. 

 

Ads1982

Is it possible to have two residential mortgages.

Yes - if you can afford it, this is possible. 

In your specific situation, it is probably going to work out cheaper to see and pay the ERC.

Others have mentioned the stamp duty, the consent to let issue, satisfying a new lender on the mortgage on the existing property not to mention remaining financially tied to somebody who may or may not decide to make your life difficult. 

Sometimes the financial tie up is unavoidable (divorce with kids etc) but if there is a way to avoid this, then that is always the best option. 

Finally, presuming you have some meaningful equity in the already owned property you will have a much bigger deposit, and you won't have to worry about having tenants and what happens if they don't pay...i.e. you will need to find the money to cover both mortgages!