Can I use the equity in an investment property as a deposit when trading up my PPR?

[Elderflower]

Hello All,

When purchasing a second home does the 20% deposit have to be cash/money in the bank?

I own an apartment with 28% LTV. Can part of this be seen as your 20% deposit without having to sell, in a similar way that land value can represent your deposit if you are going for a mortgage to build on it?

Thanks in advance

 

[skrooge]

I would think the equity would need to be realisable by the lender. That would be difficult if it was tied up in another property.

Depending on your income and existing loan one option might be to try and consolidate the two properties into a single loan with the same lender. However, this wouldn't be a standard PPR mortgage product.

Alternatively to use your existing equity that you've built up in your apartment you would probably be looking at an equity release product. There are some lenders that might offer this but what and where the funds can be used may be restricted e.g., limited to home renovation. So to release equity you might have to remortgage. At a guess someone like an ICS might facilitate this

Lets say you could do this to meet the deposit requirement you would be increasing your existing mortgage/repayments which may in turn reduce the amount you can borrow.

 

[Fahrenheit]

Hi Elderflower,

Yes that is quite a straightforward proposal if the key data stacks up - e.g. income, location, number of bedrooms, rental potential.

Both Finance Ireland & ICS will facilitate that for you.

You'd refinance the apartment to raise the 20% deposit on the new home residence.

No other lenders will allow any portion of the deposit to come from borrowed sources.

Good luck!!



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[Elderflower]

Thank you both for your replies.

This mortgage is with UB, so would we have to break out of our fixed rate and move the whole mortgage to ICS / Finance Ireland before this could happen. And also would the new mortgage have to be with these banks too?