Mortgaging an unmortgaged house to raise money

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paddy328i

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Hi,

I have a house rented out that I bought a few years ago from savings and a loan from family members.

I've since taken a mortgage to buy a house that I currently live in.

The plan is to repay family members as I save the money from rent + savings etc.

If needed, is there a way to mortgage the unmortgaged house to raise funds for my own disposal (replaying balance of what is owed to family)? I've searched on here but can only find references to mortgaging a house to fund extensions etc.

Thanks,
 
Why don't you remortgage your PPR? If you mess with the other one you'd have to get a BTL mortgage (more expensive), I believe.
 
My monthly payments on my PPR are near the max of what I can afford.

Would I really need a BTL if I'm not actually buying it?
 
I'm not sure but you'd need to check. I'm not even sure if a bank would give you a mortgage as normally (as you said) it's for refurbishment. I don't really know the answer to that Google results are all from UK.. Perhaps another poster will know or you could ring and ask the bank.
Another angle to consider, is now that you have your own house, do you still want to be a landlord? Almost sounds it'd be easier to sell the rental, pay off family debts and be done.
 
It would be a BTL mortgage because it's secured on a BTL, ordinary home loan rates are usually for principle private residence.

If you are near the top of affordability with your existing mortgage then you might not meet criteria for extra borrowing anyway as banks will stress test repayments and only take into account a certain amount of rental income.

Thirdly banks were only doing equity releases for work to the mortgaged house, now they may have lightened up on that at this stage but your loan purpose is hard to prove, as in loans to relatives, unless you have some evidence of that to satisfy the bank. They still may not consider this a reason for equity release, best bet is to check with a few.
 
paddy328i said:
Would I really need a BTL if I'm not actually buying it?
Click to expand...
Yes .

There are only 2 type of mortgage available:
1. BTL / investment mortgage, or
2. PPR / PDH

If you're not living in the house as your primary residence, it's a BTL mortgage. It's doesn't matter if you're not buying it, or indeed if you're not going to rent it out (e.g. mortgage on a holiday home).

You might be able to raise less than 50% of the value, but only with a specialist lender like ICS (Dilosk) or Finance Ireland.

The rate will be higher than your own mortgage. And you need to get tax advice on whether or not the interest is tax deductible.
You will incur legal fees in getting a mortgage.
 
Hi paddy

The first question you should ask yourself if you should have this property at all.

If you are at the max for your PPR, it will probably make sense to sell the BTL and repay the PPR mortgage.

It will not make sense to have a mortgage at 5% to own a BTL.

Brendan
 
Hi all, thanks for the replies.

Let me put some more flesh on the bone.

We bought the first house (the unmortgaged house) as a home in another part of the country, where we are both originally from using our own savings and savings from family. Work has kept us in Dublin since and it's been rented out in interim.

Covid etc. and all the new working from home arrangements possibly being made permanent might make it possible to move back to the unmortgaged house.

We’ve since bought in Dublin with a mortgage in order to stop paying rent in Dublin.

We owe family 145k. They don’t want or need that money in the near term. We currently have 100k savings (their money essentially) sitting there doing nothing productive. We consistently add to our savings every month.

Our logic was to throw the guts of our savings at our mortgage in Dublin reducing the monthly repayments substantially (thus paying less interest and increasing our ability to save).

Then, the idea was, when the time would come when family look for their pound of flesh, we would like a way to raise that money (without selling either house).

Our thoughts were (and it seems not such a simple idea going by feedback) to raise the minimum of whatever we need for family against the unmortgaged house by getting a mortgage on it.

With our reduced monthly mortgage repayments on our Dublin home we wouldn’t be anywhere near the max repayment amount allowed by the banks on our current mortgage so that we could show we had the disposable income to pay for the second mortgage.

On the other hand, we could raise extra against the mortgaged house in Dublin perhaps but going by feedback that seems to be only for improvements.

Make sense?
 
OK

So you have a mortgage of €145k on your home and you have €100k cash.
Yes, you should pay this off your mortgage.

Anything might happen in the future...

1) Your family might not come looking for the money for a long time
2) If they do come, you may well be able to borrow it against one of the properties even if that is difficult now.
3) It may suit you to sell one of the properties to repay the loan.

The future is uncertain. What is certain is that, unless you are on a tracker, you are paying one of the highest mortgage rates in the eurozone. Paying down that mortgage is the equivalent of getting a tax-free, risk-free return equal the the mortgage rate you are paying.

Brendan
 
Thanks again for your reply.

Just to clarify, we have 100k cash, owe 145k to family and we have a c. 400k mortgage.
 
OK, the same principle applies

If your family doesn't want the money for the foreseeable future, you should pay down your mortgage.

Brendan
 
Definitely but how to raise it again is the problem. That's where the mortgage idea came from.

Anyway of doing that, or other ways?
 
Dilosk & Finance Ireland will most likely be the only lenders that will approve this as they are still quite flexible with regards to the proposed use of funds when releasing equity on a property(either on a buy to let property or on a private residence ).

If the loan to value is 50% or less ICS & Finance Ireland will charge you 3.75%.
This is a buy to let variable rate which of course means it could rise.
To raise 145Ke over say 25 years with ICS(they lend up to age 75 on buy to lets) the property would need to rent for at least 1300e/month.
This would cost 745e/month.

To get approved however all your personal circumstances would be assessed as well - age, dependents, income, loans, mortgage commitments etc.


Good luck!

[email protected]
 
You want to borrow €145,000 at 5% and at the same time use €100,000 cash to pay off a mortgage at 3%? That makes no sense.
 
paddy328i said:
If needed, is there a way to mortgage the unmortgaged house to raise funds for my own disposal (replaying balance of what is owed to family)?
Click to expand...
paddy328i said:
We owe family 145k. They don’t want or need that money in the near term. We currently have 100k savings (their money essentially) sitting there doing nothing productive. We consistently add to our savings every month.

Our logic was to throw the guts of our savings at our mortgage in Dublin reducing the monthly repayments substantially (thus paying less interest and increasing our ability to save).

Then, the idea was, when the time would come when family look for their pound of flesh, we would like a way to raise that money (without selling either house).
Click to expand...

You'd be paying BTL rates on the BTL mortgage for the sake of saving PPR rates on your Dublin house.
 
Hi, never said I wanted to borrow BTL rates, that's what others have suggested would have to happen
 
It’s silly really that the mainstream banks don’t do equity release.

I’m not for one moment advocating reckless lending.

But if I owe nothing on my family home, it’s worth €800k, I want to borrow €350k, and my salary is €100k, what’s the problem?
 
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