A second mortgage

dreamster

Hi, I'm looking to buy a second property. I want to rent out my current house. In principle, we have mortgage approval to buy an investment property. However, we want to rent out our current property and live in the second house. The reason I don't want the bank to know that is because I have a tracker mortgage on the first property. If they know that's the commercial property, I have to change that mortgage into a commercial one instead of what it is now and I will lose the tracker. I really don't want that to happen, so we are going to try the route of getting the second mortgage as the commercial one, but rent out the first property.
Can anyone tell me is this really not a good idea? And why exactly?
Who is to know which house we rent out? If we pay our rental tax and all is above board would we be caught out that way?

jam_mac_jam

You will need to register the property you will need the address to do this, your tenant is likely going to want to claim tax relief. So to be above board you will need to register the correct property.

dreamster

See, this is the stuff I don't know. Thanks!

Skybox

Firstly you should check the terms and conditions of you mortgage. AFAIK, there were some banks giving out tracker mortgages back in the day for investment property so from the banks perspective unless it specifically mentions renting the property = losing the tracker, you should be ok.

From a tenant point of view, rent relief was abolished in 2010 for all new rentals so unless the tenant has been renting the same property (which will not be the case in your scenario), they will not qualify for rent relief.

You will need to register the property with the PRTB but whether or not the bank would have access to this information, I don't really know.

Where it will most likely affect you is if you are claiming mortgage interest relief on the existing property. This relief can only be claimed on you main home and has also been abolished for new purchases. You would not qualify for the relief on the new property and if the old property is rented out, you would not qualify for it on that property either.

angeldelight

Skybox wrote: »

Firstly you should check the terms and conditions of you mortgage. AFAIK, there were some banks giving out tracker mortgages back in the day for investment property so from the banks perspective unless it specifically mentions renting the property = losing the tracker, you should be ok.

From a tenant point of view, rent relief was abolished in 2010 for all new rentals so unless the tenant has been renting the same property (which will not be the case in your scenario), they will not qualify for rent relief.

You will need to register the property with the PRTB but whether or not the bank would have access to this information, I don't really know.

Where it will most likely affect you is if you are claiming mortgage interest relief on the existing property. This relief can only be claimed on you main home and has also been abolished for new purchases. You would not qualify for the relief on the new property and if the old property is rented out, you would not qualify for it on that property either.

The tenant just needs to have been claiming rent relief for a property before the relief was abolished - doesn't need to be the same property so a tenant could register for rent relief. This would mean revenue would have your details, but again don't think the bank would have access to it

dreamster

I went off there and was thinking would the bank have access to that information. I might ring another bank and just ask that question. It's probably the simplest way to find out. Thanks for the replies!

Ray Palmer

You know you can transfer a tracker mortgage with some of the banks now?

Much safer option and there would be legal questions about what you are suggesting AFAIK.

dreamster

They won't let me transfer the tracker. The girl in the bank said I would definitely lose it. It's the legal thing that I'm wondering about too. Like is illegal to do it, or just dishonest?

Ray Palmer

dreamster wrote: »

They won't let me transfer the tracker. The girl in the bank said I would definitely lose it. It's the legal thing that I'm wondering about too. Like is illegal to do it, or just dishonest?

Dishonest things with contracts tend to be called fraud and remains illegal. They can retro actively charge you on finding out but realistically they probably wouldn't bother. That doesn't mean that won't change.

dreamster

Well could you not have just said in your first reply that it is fraud? I was looking for honest answers not indirect riddles. I said in the beginning I don't have a clue and that's why I posted.

Ray Palmer

dreamster wrote: »

Well could you not have just said in your first reply that it is fraud? I was looking for honest answers not indirect riddles. I said in the beginning I don't have a clue and that's why I posted.

I don't know for sure but it makes logical sense. What exactly did you think deceiving a mortgage company would be called?

Liam D Ferguson

As has been said before, different banks have different policies on this, so there's no benefit to ringing another bank.

• Check the original documentation in relation to your mortgage. If it says that you must notify the bank if you let the property, then you have your answer. If it doesn't, don't.
• Do tell your property insurance company if you move out. That's a relevant fact for insurance.
• Get on to Revenue to cancel your Tax Relief at Source (TRS). That's only applicable if you're living in the property.
• That said, you can claim 75% of the mortgage interest plus expenses against your rental income before having to pay tax on the balance.

Droghead

I am currently in the same situation as yourself and I spoke to my Bank and advised I wanted to rent out existing house and build a new one....

When I spoke to the manager it was he who said i would be mad to sell the current property if I could rent as the interest rate I on so low... I will still get the tracker rate despite the fact I am renting it out..