Using one property as security for another

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DJRoe
DJRoe Posts: 5 Forumite
in Mortgages & endowments
Hi,

Can anyone tell me if this is possible...

I own two properties with significant mortgages on them.

Property A is worth around £750,000 with a mortgage of £400,000 - this is where I live.
Property B is worth around £670,000 with a mortgage of £400,000 - rented out on a BTL mortgage.

The value of the two properties is fairly accurate as almost identical properties have been sold for those amounts in 2019.

Would a lender allow the equity in property A (£350,000), coupled with a cash payment from me of £50,000 to pay off property B? Leaving me with a mortgage of £800,000 secured against a fully owned £675,000 property?

This seems do-able to me - as I'd still owe the same amount (£800,000) but it wouldn't be split over two properties.

Does any of that make sense?

Any thoughts/help is much appreciated.

Thanks DJRoe

Comments

  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
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    100% mortgages are not available, you could get upto 85% these days for equity release.
  • glosoli
    glosoli Posts: 739 Forumite
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    If I have read it right, I don't see how it could be a goer, as you cannot borrow up to 100% of a property value. Potentially with the right lender, you could increase the mortgage on property A to 90% (increase of £275,000) but you would still be £75,000 short after you make your own injection of £50,000.

    Furthermore, this would assume the lender wouldn't classify the repayment of the Buy to Let mortgage as Debt Consolidation, which they may, which would reduce the LTV/field of potential lenders even further.
  • DJRoe
    DJRoe Posts: 5 Forumite
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    thanks for the replies. back to the drawing board!!!
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Why would you want to do this?

    What problem are you trying to solve?

    One issue you have is any borrowing against your main home will have higher rates as your LTV increases from the current 54%
  • DJRoe
    DJRoe Posts: 5 Forumite
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    The BTL tax changes mean I don't really earn much from the rental anymore. Thought if I could pay that one off, it might work in my favour.

    I'm no expert, and looking at the responses it's not as simple as i thought. My initial thoughts were I'd still owe the same, but I'd effectively pay less tax on rental and have better interest rate terms for more of what I owed.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    If you got it wrong you would pay more tax on the rental as you would lose all tax relief.


    What rates are the two loans
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
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    DJRoe wrote: »
    thanks for the replies. back to the drawing board!!!

    Or sell the BTL and live nearly mortgage free - that would be my choice.
  • jackieblack
    jackieblack Posts: 10,317 Forumite
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    foxy-stoat wrote: »
    Or sell the BTL and live nearly mortgage free - that would be my choice.

    Mine too - the huge reduction in the amount being paid out for the two mortgages would surely more than offset the loss of rental income :huh:
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  • DJRoe
    DJRoe Posts: 5 Forumite
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    1.23% for residence
    1.99% BTL

    Both up in next few months...
  • DJRoe
    DJRoe Posts: 5 Forumite
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    Going nearly mortgage free is a nice idea, but then all my money is tied up in a property. I have no pension. Feel I need to invest in something...
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