Moving & leveraging

M

Mrmr

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Can anyone advise on whether any bank would work with us on this:
1) We want to change 80K/9 yr remaining of home owner mortgage debt to BTL over 25 yrs
2) We want to borrow 200K over 26 yrs for a new PPR

We may not be able to sell current PPR in the timeframe we want and also don't want to be under massive pressure/renting or homeless as a consequence of trying to move.
The new BTL will bring in 1200+ so even after tax will cover the 25yr term, not a bad asset.
We are one income family with 3 children, 60K Gross to cover the new mortgage.
We are both 40 one Stay at home, one PAYE. Some savings which we want to ignore and leave where they are. No other debts, 2 pensions for future.
 
You are aged 40 and you want to have borrowings of €280k on a salary of €60k.

Even if the bank agreed, you should not put yourself under this pressure.

Sell the house and use the equity to buy the new house. You will be getting a tax-free return of at least 3% which is much better than any other investment.

If you insist on keeping it, then use your savings to reduce your borrowings.

While you have borrowings and savings, you are effectively borrowing at 3% to put it on deposit at 0.5%. Not a good idea.

Brendan
 
Hi Brendan,

It's on the market but not much interest, so might be a better proposal to keep and rent, which is why we're considering our options. The intention would be to clear the BTL asap and make it an income stream.

OK, So if we would reduce the current debt to 40K, and then borrowings of 240K/ 4 times gross, with two houses as the assets, would any bank touch that?
 
It's very clear that you should sell your current house before buying another house.

The second option would be to buy another house pending the sale of your current house.

If you go for the second option, you should not pay down the borrowings on your existing home. You should use your savings to reduce the amount you have to borrow for the new house.

I don't know if a lender will give you the money. As it would be marginal, I would suggest using a broker who would present your case best.

Brendan
 
I'm not sure a lender will give us 200K pending sale?
Would a broker really be able to get us a deal like this?
 
Your case is marginal, so a broker will improve your chances of getting a deal.

You don't need to tell the lender that it's pending sale.

You take out the mortgage as if you are keeping your buy to let. Then as soon as you can, you sell the buy to let and pay down the mortgage.

Make sure to take out a variable rate loan as you can pay amounts off it without penalty.

The best deal is probably EBS as you will get 2% cash back.

Brendan
 
Hi Brendan,

I discussed the plan with a marginal case provider (pepper). They are willing to allow us to hold the current home(80K), pending sale or rental (we'll live there while we're doing minor cleanup/work on the new anyway which makes moving much less stressful).
Using the 40K savings, they are willing to lend the balance of 160K secured on the new place over the maximum 25 years. This gives us a total 4 times salary debt.

Are pepper as reputable as any of the State banks to take this risk with?
 
If you take out a loan of 4 times your income, it doesn't really matter which bank it's with.

The problem with Pepper is that the rates will reflect the additional risk.

If you sell the other house and get your loan down to a lesser level, you will be able to refinance to a mainstream lender at lower rates.

However, it's quite likely that you will experience payment difficulties during the two mortgage period. If that happens, then you will have a bad record and you will be stuck with Pepper and their high rates for at least 5 years until your ICB record cleans up.

Brendan
 
Theyve given me a rate of 3.6/3.72 APR? Is that not in line with market?
For example EBS were quoting me 3.5 on a much lower amount, i.e have to sell house 1 first.
 
3.6% is a surprisingly good rate. I thought it would be higher.

Do they also charge an administration fee?

They don't quote their rates on their website.

They should also have a policy statement about how they set their rates. It might be there, but I can't see it.

They are more efficient than the other banks, so they could be cheaper.

Brendan
 
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