Releasing Equity

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A_b

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Hi,

I've been approved for a mortgage for a 2nd property which I am going to live in. My 1st property is an investment property in another part of the country with less than 50% mortgage. The rental income on this fully covers the mortgage repayments. Would I have to inform the bank where I received the 2nd mortgage if I released equity now on the 1st property? It would only cost me approx 100euro a month

Thanks!
 
You will have to notify them of any other borrowings, including mortgages as this determines the amount you can borrow. It would probably show up on an ICB anyway.
 
what if I do this after I draw down the mortgage for 2nd property?
 
Technically you could wait till after you draw down your second mortgage (or even after you receive your loan offer but they do another credit check before cheque issue so that could be a bit of a gamble and not recommended) and then apply for an equity release on your first property. Again, you will have to infrom this lender of your second mortgage which will affect the amount you can borrow with them.

Can I ask why you don't want to tell the bank about the equity release?
 
Its not that I dont want to tell. I was just wondering if I would have to tell. After speaking to the bank that I have the 1st mortgage with, they would have no problem giving me the 2nd mortgage and releasing equity so I wanted to see if it would be the same if I went with the other bank for the 2nd mortgage (all ready to go!)
 
As long as your income is sufficient to service the loan there shouldn't be a problem. If you are using the top up on your existing mortgage as a deposit for your second house the lender may question where you are getting the funds to complete the purchase and then you would have to tell them. If this is not what you are using the top up for and you waited until after you drew down your second mortgage you wouldn't have to tell them about it.

Either way as long as your income is high enough it shouldn't be a problem.
 
A_b said:
Would I have to inform the bank where I received the 2nd mortgage if I released equity now on the 1st property? It would only cost me approx 100euro a month
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If you are doing this then make sure that you sort the tax issues out - e.g. if the existing 50% mortgage on the investment property was used to purchase that property then all mortgage interest on that loan can be set against rental income. However if the top-up is used to purchase your PPR then you cannot offset interest on the additional amount against rental income but you can add it to any other interest on loans used to purchase the PPR when working out what qualifies for owner occupier mortgage interest relief. You just need to be careful to clarify these matters when doing your rental income tax returns. But your accountant should be able to assist.
 
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