Remortgaging

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Hi we've just bought a new house, cash purchase following an inheritance. Plan is to stay in our current home whilst renovating/extending the new house, then probably rent our current house once we move.

We need to raise some money to do the work on the new house and should be able to do this by remortgaging our current house as we don't owe alot on the mortgage.

The question is what we tell the bank when we ask about a remortgage. I think we should be honest and tell them it's to use on another house. Dh thinks we should say it's for renovation work etc but imply it's on our current house. He thinks we'll complicate things otherwise. Our financial adviser also suggested doing this! I feel uncomfortable not being entirely honest about it though, and worry we could get into trouble with the bank!

Has anyone else been in this situation and what did you do?

When we remortgaged the bank wanted evidence of planning permission and a builders quote. I'm sure banks vary quite a lot. Some maybe have more discretion, others the computer says they need (a), (b), (c). Would you be remortgaging with the same company - otherwise do you need to be explicit about it at all ??

We'll be using the same company so maybe they won't need so much information?

But don't people remortgage one property to finance another? I assumed (from tv programmes!) that this was fairly acceptable practice?

You need to be honest. Are you worried that your lender won't offer you the mortgage if they know what you're using the money for? They most likely will be fine with it, but if not then you'll need to find another way to finance it. If you lie in order to get around their rules you are committing fraud.

as far as I know we weren't even asked why we were remortgaging when we did so recently - we just fit the criteria. you will need a buy to let mortgage when you let out your home so may want to get that now if you can to avoid early redemption penalties and two sets of set up costs.

I don't think we'll have a problem remortgaging in principal as there is plenty of equity in the current house. And I don't think they would have a problem with us using the money on another property as their money would be well protected, especially as the new property has no mortgage and is worth 5-6x what we are asking to borrow. Dh is concerned that we'll have problems because we intend to rent eventually - I think he's worried we'll end up on a higher interest rate.

You will end up with a higher rate when you rent the house out. That unfortunately is inevitable whether you borrow more or not and for any purpose.

I know - we're just trying to delay changing the rate too much until we actually move! We're spoilt at the moment as on base rate only!
I still think honesty is the best policy, will talk to dh about it again.

I can't speak for all lenders, but where I work the rate only goes up 6 months after you have actually moved out the house. We allow you to keep the exact same mortgage you had before but just adjust the rate. Some lenders may require you to move your mortgage onto a specific btl mortgage though. But even then I'm sure you wouldn't have to until you've actually rented it out.

Well good news! Spoke to dh again and we agreed we needed to be upfront about what the money was for. Mortgage adviser wasn't bothered in the slightest - in fact raising funds for a second property was one of the options on her computer system! So we are able to borrow the money we need!!