Buying second home

R

Rickhanshaw

Registered User
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Hi guys,
I'd like some advice please.

I have a home worth 400k that I own outright. Let's call it home a.

I wish to buy a second home worth approx 140k that I will call home b.

Home b will be my ppr for the next few years before moving back to home a.

I don't plan to rent home a as I will be spending weekends and holidays there etc. I will eventually rent out or sell home b after moving back to home a.

I meet the criteria for a mortgage to buy home b.

Is it possible to get a better rate by taking out a mortgage on home a which would have a better LTV ratio? Is this more complicated? Does anyone have any direct experience with this that they could share?

Also if in 5 years time I keep b and rent it out, could I claim mortgage interest relief if the mortgage used to buy home b is actually on home a?

Thanks a million,
Rick.
 
You won't get a mortgage on Home A to purchase home B. However you may well get a mortgage and better rate by putting up both properties as security. If you rent out Home B which still has a mortgage at time of renting you can claim relief of 70% of interest paid against your rental income. You can't claim interest relief if mortgage is on Home A.
 
44brendan said:
If you rent out Home B which still has a mortgage at time of renting you can claim relief of 70% of interest paid against your rental income. You can't claim interest relief if mortgage is on Home A.
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If the mortgage is taken out to acquire a property which is rented out then 75% of the interest will qualify as a deduction, the loan could be secured on house A or B or both.
 
44brendan said:
You won't get a mortgage on Home A to purchase home B
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I am interested as to why a Bank would not give out a loan secured on a mortgage free property (where the Loan would be well secured) to purchase another property. What are the problems from the banks point of view)
 
I'd say just bank policy, it's basically an equity release which is a dirty word since the tiger died. There isn't always logic to policy, just blanket rules that don't allow for exceptions such as yours.
 
Thanks Monbretia. I would agree with you. Seems stupid to me to have blanket bank policies. I have something specific in mind where an equity release is the more suitable for me and the bank will have plenty of equity in the mortgage free property
 
response from Monbretia is broadly indicative of bank approach to such requests. may seem stupid but this is irrelevant as policy dictates such an approach. Ask around & you may find a bank who will support such a proposal. However based on my own underwriting experience I feel that you will not be successful!
 
Is better getting the mortgage with the lower loan to value as the lender will feel more confident lending the money, because you are not renting either property you will be able to get a normal residential mortgage, not needing a buy to let mortgage.
 
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