Mortgage for "second" home, what are my options?

winstwinst

Hi folks,

Appreciate some suggestions and clarifications. Here are my situations.

Got property in Bucks, value £330k. Bought in 2001. Moved away because of employment. Later we got consent to rent from lender 2007, and it's now occupied with tenancy by a parent with kids.

Got second property in Berks. Bucks property remortgaged to raise part of the money for Berks property. Value £750k. 

Both mortgages paid off 2 years ago. 

Have been renting a flat in London for the last few years. Both of us in employment, over 55s. No serious health issues and likely to keep working for some time.

Longer term we want to buy a flat in London, this is likely £500k -  £600k. Shorter term, we need some upgrade to the house in Berks. 

The house (Berks) upgrade is to replace an old conservatory (2.6m2) with a larger one (3.5m2??), and upgrade the kitchen (smaller than the old conservatory!). Ground floor, no upper floor. I guess this is £50k?

I know there are options like equity release, which could be in the form of lifetime mortgage in repayment, or interest only option. Some lenders will also consider older borrowers even to 80 and 90. The option of interest only, or no repayment necessary, and selling the property at the end to pay off the debt is a difficult one to process; while I may not be here to deal with it, someone else gains.

Then, the terminology is a headache. The two properties have had mortgages from same lender. Does that mean I cannot raise funds / mortgage against their value?? I cannot "remortgage" when that's paid off? I can mortgage to "move home" but some lenders treat that as paying off the first mortgage and getting a new mortgage for the new home. Question is to raise money for the third property. Family building society has family mortgage options where you can use different "security" options, but unclear if equity can be had in one step.

I think equity release is the most straightforward (apart from credit card) to fund the house upgrade, and I can pay it off gradually. Am I correct?

I wonder if in one stroke I can deal with the two things (a) house upgrade, (b) London flat. I don't want to have raised some equity capital, and then return later for more equity, only find worse deals or I am barred from some choices. 

Thank you

David

silvercar

You are “only” 55. Get a normal mortgage on the Berks property for “home improvements”. I’d consider an offset or taking more than you need, if you need to give yourself a deposit for the London flat. Then when you buy your London flat you get a residential mortgage on it. Most lenders will be understanding that you want a second home that isn’t going to be rented out. 

As long as your employment seems safe to continue into retirement eg not a roofer, then lenders will lend up to 75/ 80/ 85+. 

If you want to do it all in one hit, then you need to be buying the London flat before (or when) you do the extension. Then you take all the money against the London flat and use your savings for the extension in Berks. 

I’m assuming that at your age you have some savings, that you would use as the deposit on the London flat, but then if you need to borrow for the extension and want to buy in London, where is the deposit money. Maybe seeing a broker is best as they would advise on how to structure it all. Theoretically you have a lot of money in property that you may need releasing.