Property TV | Property Question Time – Ep 123 – Transferring Mortgage Options
Lucia France: And we have a question here for Paul as well. So this one’s to Paul. I have two rental properties. Both have buy to let mortgages. Each property has approximately 75% equity. I’m considering moving into property A and would therefore need to get rid of the buy to let mortgage on that property or transfer it to a residential property mortgage. My current mortgage lender told me that I can’t just transfer the current two mortgages to property B. I understand that there would need to be valuations and set up fees, et cetera. And that the only option I have is to either pay off mortgage A with funds I already have. I don’t have these funds. Or sell property B to pay off the mortgage or get a residential mortgage for property A. Could I not just re mortgage with another buy to let lender and then I could effectively pay off one buy to let mortgage on the one I want to live in. I don’t earn enough to replace the buy to let mortgage on property A with a residential mortgage. Would a residential lender consider the buy to let profit on property B as income? If so, I would earn enough for a residential mortgage. That is quite lengthy question. So Paul, what do you say there?
Paul Mahoney: Okay. I can understand why your current lender has told you that you can’t just transfer one to the other. Given that they’re both currently on a buy to let mortgage with 75% equity. I don’t see why you couldn’t do what you’ve just said there so far as re mortgage one of them and take the equity… Sorry, re mortgage property B with a new lender and perhaps assuming the properties are of the same value, you haven’t mentioned that, but let’s say they’re of the same value, 75% equity in each. You could re mortgage property B with a new lender, take that equity out and pay off property A. I don’t see any reason why you wouldn’t be able to do that. That would mean that property A would be debt free. You could then move into that property and you would have a 50% loan to value mortgage on property B. Which will be a buy to let mortgage.
I suppose that kind of means that your question about needing property income isn’t necessarily required, but just to answer it anyway. Some lenders will consider property income whereas others won’t. So it would be about seeking the lenders that do. Again, it makes sense to get professional advice there to get a broader understanding of the market, both the residential and buy to let mortgages. There is a broad range of products that are only available to intermediaries or advisers and aren’t available to individuals such as yourself if you were to walk into your high street bank.
Aside from that of course the knowledge of the market is quite valuable. So making sure that you get the best product for you, the best terms, the rates, save you money and time all that sort of stuff. So, going back to the original point of the question, I’m quite sure that you should be able to re mortgage property B, take that equity and pay off property A. Some lenders perhaps wouldn’t like that. Some lenders on property B perhaps wouldn’t like the fact that you’re using it to pay off debt on another property because they’ll want to know that the use of the funds. But again, that just comes back to finding lenders that are okay with it. And that is perfect job for an advisor to go out to the market, ask all of these questions from a broad range of lenders and get you the best outcome.