mortgages

[vinny155]

quick question for those with the knowledge

can i use the equity from 1 property to buy a second property,only asking as it seems i cant according to 1 mortgage company

i thought you could release 80% of equity in your property for whatever reason as it is my money to start with in the first place

am i missing something here or have i received the wrong information

thought id ask here as there surely is some mortgage gurus amoungst us

cheers for any info

[challis349]

Surely your amount of equity depends on the houses value, we have around 20,000 equity in our house, but thats only if we sell it, if we wanted to take that money out, then in would mean re mortgaging the house in order to use the equity, if that makes sense

[vinny155]

cheers kev

that makes perfect sence and is really what im trying to achieve,remortgage current property to a buy to let mortgage and then use the equity from that as a deposit for the new house therefor having two mortgages,however the people i was talking to today say i cant use the equity as a deposit as it is a loan?? how is it a loan if it is my money and i would be paying the buy to let mortgage anyway

[Darwil]

You can only release equity on what you own, if you've got mortgage outstanding then you can only get what your lender is prepared to release as a re-mortgage.
In other words you can't borrow on existing debt.

[vinny155]

cheers darwil
i also understand this,for example i own 60% of current flat so have 40% owing on the mortgage,i thought that i could release 80% of the 60% that i own by remortgaging therfor the bank would in effect have a 15% deposit (roughly) i would have some money released and a new mortgage on current property

with the money that ive released i would then use as a deposit for new house,my head is starting to hurt now,this is the way i understand that it should work anyway but it seems not

[Mark_T]

With a view to keeping things simple, what you are trying to do is get an 85% mortgage based on current value of your property and then use the proceeds to pay off the old mortgage and the remaining cash as deposit for a new buy-to-let property, right?

If so the first question is can you get a mortgage of 85% of the value based on your current income?

I know you can get buy-to-let mortgages based on income +rental income or even just rental income sometimes, but for the property you are in you'll have to justify the new 85% mortgage based on your current (non-rental) income before you get started on the rest.

[Darwil]

The problem is that lenders generally speaking don't regard borrowed money as being acceptable as a deposit, released equity is regarded as borrowed money unfortunately.
Whatever you do don't go to anyone other than a recognised lender, so many people do this in desparation and get themselves into serious bother, and sometimes loose everything they own.

[vinny155]

cheers mark t


yes something along those lines,the buy to let mortgage would be the 85%mortgage on the current property,rent would more than cover the new mortgage repayments,

the money/equity from this remortgage would allow 20% deposit on new property,have applied for mortgage working off these figures and would be approved,the problem is releasing the equity from my current flat.

ive only spoken with my current mortgage provider regarding releasing equity and using it as a deposit and they said they wouldnt be able to do it,i was wondering if this was the norm,ive just gotta get on the phone tommorrow to a few more and see what can be done,i know they are tight with the cash at the moment but this seems ridiculous

[vinny155]

[QUOTE=Darwil;673253]The problem is that lenders generally speaking don't regard borrowed money as being acceptable as a deposit, released equity is regarded as borrowed money unfortunately.
.[/QUOTE]

now things are starting to make sence

[Mark_T]

Sounds like you've got yourself into a bit of a catch-22 situation.

You can't get a buy-to-let mortgage as a first mortgage on a property you are currently living in as far as I know, but you need the proceeds from that to get the property you want to live in.

Sounds like you need to sit down with a good mortgage provider/broker and try to explain the whole deal that you have in mind.

[pgkevet]

What it really comes down to is how much in total you are able to finance as a loan. If your ability to pay off the mortgage you now have and the new mortgage and any other outstandings is easily within your means...from the bank's viewpoint rather than yours.. then you should be able to get the loan.
Banks are being way more cautious after the sub prime nonsense and they know full well that interest rates will soar as soon as the artificial low rates we have, depressions in economy etc show any sign of recovery. They also know that house prices are going to be sluggish..will drop when those rates go up.
They are also going to be wondering why you want a second house. If it's for renting out then that's commercial. If you want to own a second house then remember you can be liable for capital gains tax on it later. If you're buying it as a fixer-upper and sale then it's commercial..

Simple rule. If you can afford to repay and have some equity you can always borrow money. If you;re trying to pull a fast one ..well banks are cleverer at that than you and they've seen it all.

You shouldn't actually have to remortage the house to release deposit anyway...you should be able to remortgage the pair together or use one as security against the other - that's a better deal for the bank 'cos they screw you for the valuation fees and insurances and arrangement fees and life policies.

[vinny155]

cheers for that pgk and the rest of the lads

having had a chat with the better half,full time nurse,and a chat with myself,fully employed carpenter,we have come to the decision that we could probably have a better lifestyle than we do now,ie not being able to move outa this flat into a better quality of living,by just jacking in our jobs,default on the mortgage,claim the dole,then get the mrs pregnant a good few times,claim even more benefits and get a big council house and pay f**k all towards it,it really does seem the only way.......whats going on

no offence meant

[Eckchaz]

Vinny,

This is a very difficult subject for anyone to give you a definative answer, unless they are a independant finacial adviser or working for a brokers.. and it really does depend on who the actual lender is and their terms..

I can understand what you have been told.. your mortgage company may not do buy to let mortgages, so they simply cant offer it.. or it could be down to other things like LTV, disposable income, they may not be able to take in rental income, etc etc etc.. there are too many things demographically that can affect this and too many different terms on mortgages.

We own 2 propertys.. one is buy to let.. the other is rented out (no mortgage/outright owned) and the rental we get from the second place, pays for our third place we live in... We are currently looking for another place to buy and with the amount of products on available on the market.. I have already been told that some mortgages will not take the rental income into consideration.

Luckily I have a very close financial advisor as a friend who can get me what I want :) So I do suggest you contact a broker/independant advisor to get what you need, as you wont get the answer you need from here or your current advisor :)

[vinny155]

Thanks eddie
will get onto an advisor asap,
presumption is the mother of all f**k ups as they say....this situation only came to light today,i was advised by the same mortgage lender 4 weeks ago that my plan wouldnt be a problem,then today when i went to implement my plan it was shot down dead in the water,i will have a look about at the weekend properly,just thought i shoot the question out there and am happy with all the replies but yes an advisor is the way to go

thanks again

[pgkevet]

sadly my personal experience of financial advisors (and I've got a few) is that whenever you want to do something a bit unconventional they're cr@p. Always worth a listen to them and fine for 'standard' items but need money for anything else and it's a case of punting around and finding it yourself - picking the right bit of luck.
It helps no end to have written plans and forecast and proposals so if you do get a sniff they can be there by next day courier or by hand before the lender goes off the boil.

If its a solid proposal then it's also worth demanding an opinion from the front man's boss if he's being difficult.

I once wrote to the head office of clydesdale when they were asking ludicrous terms and the area manager ended up ringing me up with apologies and coming round personally to sort the thing - I'd obviously got lucky with who had read it!

On another occasion i was after a business loan and was let down 2 weeks before the work was due to start.. happened to get lucky ringing TSB commercial when I spotted an ad targetting my profession. It was christmas eve and I was able to drive over and drop a foot-high pile of paperwork on the guys desk detailing my business plans, the build schematics, architects timetable etc - because it was all on the computer and just a case of printing out another bundle to add the the stacks of stuff I had.. got my answer day after boxing day..

And go in confident..don't ask..tell them what you want and what you have to offer.