LTV

Actually the property's present value is more relevant than its original purchase price.

Are you saying that you want to add borrowing equal to 1.3 times the value of property B to your existing borrowing which is equal to 0.3 times the value of property A, and that this would result in your new combined debt being equal to 0.65 times the combined value of both properties?

If so, then you would clearly be seeking to borrow more than the value of B, perhaps because this represents the cost of improvements to it, or perhaps you want to buy a Ferrari as well. Not that it matters.

Lenders are not keen to lend more than the value of a property on which the loan is secured, so to be talking of a 130% LTV is misleading. You could simply secure part of the new borrowing against the new property and part of it against the existing one. Then you would have two 65% mortgages, one secured against each property, or X% on one and Y% on the other such that neither X nor Y is more than 100, or preferably even not more than 80.

It depends on how much of the borrowing you want to secure against which property. The more you increase the property A loan (and hence LTV) by, the less property B's LTV will need to be.

Not quite - I only want to borrow 1.3 times the value of property B as a single mortgage overall (to include my existing mortgage). Thus my overall borrowing would be 65% of the total of A+B.

But would I need two mortgages? I'd rather prefer to only have one, is this possible and if so, my question remains - are lenders going to lend to me based on the joint value of both properties, or as I would only be buying one new property, on the value of that?

I don't mind securing the whole of the mortgage on both properties and presumerably, the lenders would prefer / require that anyway?

Very probably, you would. Some BTL mortagages allow for any # of properties but have costly set up fees.

Remember also that the lender will also check affordability criteria based on your income. It can be your income is the limitation, rather than the valuations. But of course the lender will not go above their % of the valuation because they want that collateral.

If you call up the mortgage Co they can sometimes do computerised valuations on the spot, which is at least a source of amusement.

I see. I also see that you have now revealed that the two properties have the same value (or at least B's now-value equals A's then-value).

They base lending primarily on your income. If you pass that test, then they like to secure the loan on property which has a value comfortably in excess of the loan. Hence 70% or 80% mortgages are easier to come by, and cheaper (lower LTV means lower risk means they can charge a lowere interest rate) than with LTVs of 100% or more.

So even if you could get someone to lend you 130% of the value of the property the loan is secured on, it will almost certainly work out much more expensive than to get two mortgages, each for 65%.

Your phrase "as I would only be buying one new property" in your last paragraph suggests that you may think there is some sort of causal link between, er, between, er, I'm not sure what and what.

The thing is that if you borrow money and secure it against a property, there is no reason why the purpose of the loan must be restricted to be used to finance the purchase of that property. In your case, you already have a mortgage on property A. You could increase the loan and use the extra money to buy a Ferrari. Or if you owned the property outright, you could raise a completely new mortgage on it and use the money to buy a Ferrari.

Or, in your specific situation, you could increase your A loan to raise money for a deposit to buy B, and use a new mortgage on B to fund the rest of its purchase. This sort of thing is done a lot in the BTL world. In fact, I've done it myself, increased the mortgage on my home enough so that (together with some savings) I could get 20% of the price of my BTL together so that I could get an 80% BTL mortgage.

If you secure the loan on both properties, then *by that fact* you will have (or to be more accurate the lenders will have (been given by you)) two mortgages.

One other thing to bear in mind is that the best rates are given in the case of "normal" mortgages, which are secured against the property in which you live. You said B won't be a BTL. What will it be? Will it be a holiday home? Will you move to live in it and will A then become an LTB? Just worth mentioning that non-standard mortgages tend to be a bit more expensive.

Almost correct. B = slightly more than A's then value.

Thanks for your insight. I mentioned my preference for one mortgage, because I suspect it would be cheaper to administrate than, say, do what I normally do, which is to shop around every 2-5 years for a better deal which would incur new fees, etc. I just assumed that it would probably work out cheaper to have one mortgage as opposed to several. Also, you can see at a glance how much is remaining rather than looking at several statements. But hey-ho, reading your other comments below, this now seems to be an unlikely scenario anyway.

OK, that's cleared that up. Good points.

I wrote that because after trying a few "decision-in-principle" web calculators, it is clear the lenders are basing their calculations on the scenario of someone wanting one mortgage for one property. My phrase above, was aimed at trying to demonstrate that in my scenario, there ought to be a different approach from the lenders because what I am thinking of doing is different from the standard case and at a guess, they may choose to use a different set of criterion for my scenario.

Thanks for the clarification throughout your post, I now realise that I was forgetting that the lenders lend to individuals based on their income, by securing the debt to the property (not to the individual), which in my case, would, as you quite rightly point out, require two loans because otherwise, even if I could get a 130% loan, it would be an expensive (and daft) loan.

Of sorts...actually, I want to buy it for some relatives to live in - rent free! (I owe them a great deal - and, if people can still conceive of this notion on the newsgroup - not just in terms of money : )

That can only be true if "slightly" means "negligibly", because if 130% of B equals 65% of A+B, as you have stated, then 65% of B must equal 65% of A, and hence A must equal B.

Wow. What are you, some kind of angel? Honour is not dead.

I did originally say approximately 30% of current mortgage is left and that the 65% figure is approximate too (actually

64.904584338670761131827155077868%) and to obfuscate the prices involved somewhat, I'd hardly call ~8k (ie >5% of the purchase price of B) negligible!

Interestingly, I've contacted my current lender and the options set out by them were more or less identical to the ones expressed by you, and the

2-mortgages-secured-on-2-properties option actually would work out very expensive (lender's base rate only on mortgage no 2) should I not be able to raise enough cash on property A to pay for property B!

So, its most probably back to the drawing board for my plans to enrich my family. Again! Nevermind. Thanks for all the help.

Don't let "base rate only on property 2" put you off. Remember the two mortgages need not secure equal-sized loans. You can max out the property 1 part to as much as they'll give you without the interest rate going too high. So instead of securing 65% of total value on one property and the other 65% on the other, secure approx 90-100% of the value of p1 on p1 and 30-40% of the value of p2 on p2.

That way only 23-31% of the loan will be charged at the higher interest rate, instead of half. Supposing the two interest rates were

5% and 7%. By borrowing only 23% of the combined loan at 7% and the other 77% at 5%, the overall effective interest rate would be less than 5.5%.

Yes that had crossed my mind, but my lender stipulates that mortgages worth over 75% of the value of property (property A), would attract a higher lender's charge (the amount of which I'm unable to obtain through their website). So although as an idea it is sound, in practice, it may be slightly more expensive than initially anticipated.

Out of interest, would there be anything stopping me from getting mortgage number 2 on property B elsewhere if both lenders were satisfied that I could afford it?

Fair enough.

Nothing at all. Also, if *you* were satisfied you could afford it but the lenders were not, you could go for a BTL mortgage on property B, for which the affordability would be assessed not on your own income but on the anticipated rent. The fact that you would be "renting" it to your relatives but paying the rent yourself, is neither here nor there.

Ah, such inspired genius! Thanks for that idea - that would help a lot if needed.

One other "little" thing that I need to clarify in my mind is that assuming the relatives live in this property for as long as they like, but one day they decide to leave and I want to / need to sell, what is the CGT position on a second home of this nature, (ie, a non-BTL property)? I take it this type of asset would be taxed on the normal CGT scales?

Wishful thinking, that there will be any capital gain worth taxing...

Well, in a way it would *not* be "non-BTL", but whether it is or isn't BTL is irrelevant, all that matters is whether it is or was your home ("principal private residence"). If it wasn't, full CGT is payable. If it was (even for part of the time) then pro-rata PRR (Private Residence Relief) is available, and if there is, then Letting Relief is also available.

It may be worth making the place your home temporarily before selling it, in which case you will automatically acquire PRR status for the last 3 years of ownership, and hence up to another 3 years' worth of LR. This means that if they stay there for no longer than about 6 years, chances are your entire CGT bill could become toast.

I do hope that was just a reference to my omission of the phrase, "if the price of the property goes up and I become liable for CGT", rather than your opinion of where property prices are heading over the long-term!

Right, so forgetting the bit about LR because I'm probably unlikely to finance the deal through a BTL mortgage and thus am not likely to follow the letting path, can you explain how you came to the 6 years figure? Or rather, also, assuming that no LR is applied, what would that figure be and why?

Thanks again for your help - CGT is a whole new world to me and I realise I'm hopelessly out of my depth with it, but I of course need to understand the risks, before I decide to take this any further and commit myself.

Consider your hope dashed.

You shouldn't forget this. Whether you finance it through a loan badged as "BTL mortgage" is completely irrelevant. In fact you *are* letting the property, except that you charging no rent. Actually, it might be wise to charge them a peppercorn rent (something like one pound a month) and draw up a propert rental agreement, just in case.

The point about LR is that this is given where a property which is partly eligible for PRR, in situations where PRR is restricted because the property is being let (since when it is let, it is obviously not available for you to use as *you* PPR).

I was assuming that LR *is* available, but without it it would be 3 years, provided you establish *some* actual period of residence, even if short. The rules provide that there is an upper bound on LR, and this bound is set at the level of PRR (or at £40k if less). Hence if you are entitled to 3 years' worth of PRR, you could also get 3 years' worth of LR, provided 3/N times the gain (where N is the number of years of ownership) does not exceed £40k.

For example if you own the property for 10 years and let it to your relatives for 9.5 years and then you use it as your home for half a year before selling it, then you get PRR for the last 3 years. If the gain is £100k, you get £30k PRR plus £30k LR, and only £40k of taxable gain then remains. There is also taper relief (having owned the place for

2 years, you get 5% off for each extra whole year) of 40% of the relieved gain, so only £24k of the £40k is taxable. If by then the annual CGT exempt amount is £12k, then you will only pay tax on £12k.

Example 2: Suppose the gain is £200k instead. Then PRR doubles to £60k, but LR maxes out at £40k. £100k gain remains, which taper reduces to £60k, and you pay tax on £48k.

Example 1a: Omit LR from example 1. Gain minus PRR is £70k, £42k after taper, £30k after AEA.

Example 2a: Omit LR from example 2. Gain minus PRR is £140k, £84k after taper, £72k after AEA.

Don't worry about it. People who worry about CGT really have too much money.

But you might keep at the back of your mind that keeping an asset for the maximum time is one way to minimise the ultimate CGT liability.

Not true I'm afraid. The way many have financed their BTL "empires" over the past few years, with constant remortgaging to raise deposits for new purchases, will leave very many worrying about CGT should they wish to liquidate their holdings for any reason.

Buy 1 flat, price goes up 8%. MEW for deposit on second flat, price of both flats goes up 8%. MEW both for deposits on 2 new flats, price of all 4 flats goes up another 8%.

Repeat ad-infinitum. The overall LTV will be very high, and yet if the flats were all to be sold, there would still be a great deal of CGT payable on those flats bought early on. So much so, that if the expected sale prices prove to be marginally false hopes, the CGT payable could leave the former landlord in a spot of bother.