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Mortgage approval to get a second house but keep the first to rent out - help!

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  • Mortgage approval to get a second house but keep the first to rent out - help!


    I was hoping I could get some advice from this forum.

    We have seen a house that we want to buy but we also want to keep our existing house to rent out and sell later if house prices go back up again.

    We spoke to our existing mortgage lender who said we can add to our existing mortgage to get the new house, but on the condition that the payments for the original house are covered by rent payments from a tenant.

    We can only get the additional money for the new house approved if we have somebody lined up to rent the original house - they will only approve the money if we produce a signed rental agreement and a bank statement to prove that the tenant's first payment to rent our house has been paid to us.

    Obviously this is going to be a nightmare to coordinate everything to be ready at the same time. We can't really get somebody to sign up - and pay - to rent our house when we haven't even had the mortgage approved for the new house, never mind moved out yet!

    The only way we were thinking that we could make this work is if we get a family member to sign a rental agreement for say, 6 months, and make the first payment to us to show this to the mortgage company. We would then just cover the rent payments via the family member until we could find someone to rent the property (which probably will be that family member or one of their friends anyway - we just need time to sort things out). Then we would be able to get the mortgage approved for the next house, move in and be out of our existing house so that the tenant can move in.

    I need to know if it is legal to do this? We don't want to do anything that might cause trouble?

    Any advice would be much appreciated

  • #2
    In the event that it would actually be the family member whom signed the agreement that rented the property from you anyhow then there would not be a problem but you would not want to jeapordise things by submitting a false AST.
    Worldwide Financial Planning is a specialist independent provider of Large mortgages.


    • #3
      Mortgage fraud! Everybody goes to jail.

      Talk to your Estate Agent. There are a lot of people who are renting property at the moment. They should be able to help. Also, if you about to buy, the seller will probably not worry about waiting. These days buyers are like gold dust.

      Just tell everybody what the situation is, and watch your problems get solved by people who are trying to make a profit out of you.


      • #4
        As this thread is a couple of months old now, just wondered if there were any new developments on it? m3120, did you get your situation sorted?


        • #5
          You would need to remortgage your present proeprty on a buy to let bais - and I don't see why you need a tenant lined up for it- as long as lender is staisifed that it will bring in enough rent to pay the mortgage you need. Having paid off your present mortgage you can then "transfer" it to the house you are buying, subject to status etc.
          RICHARD WEBSTERwww.rwco.co.uk
          As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.