Best way to transfer a mortgage, and keep the house?

Question

This might be easier if I quickly outline the situation.

Currently, I rent out my house (I have consent to let from the Bank), I wish to purchase a new house (with my girlfriend) but because I have a good rate on my current mortgage I want to move that, as it will be a more expensive house.

Ideally, I would have just got a new BTL mortgage from the bank for my old house and move my current one but the bank (Santander) will not let me do that. They say I have to sell the house.

The current mortgage is a 1% flexible mortgage, so you can appreciate its value.

I want to keep that house (at least, keep it in the family) - any ideas how I can do this?

[removed a piece of info as it was clouding the main issue]

Any advice is greatly appreciated. Thank you.

EDIT: As a note, my friend has done exactly this but with Halifax (a bank in the uk). He is now renting his old house on a BTL and owns a new house with his Fiance

Answer 1

Short answer

Get a buy-to-let mortgage from another lender. Once that's done, arrange to port the current residential mortgage to the new property.

Longer answer

I asked [Santander] if I could get a new BTL mortgage product for my current house to continue renting it out, then move my current mortgage onto a new house. They said no, I have to sell the house.

It's possible that Santander said that because they don't generally offer BTL mortgages. Start by shopping around.

Because of the potential complications of dealing with two mortgages and two banks, you may want to use a mortgage broker. I've had good experiences with Charcol, but others are available. Even if you pick your own mortgage, it's useful to have someone else to harrass the banks for you. Note that brokers do charge for their services.

Once you have actually applied for the BTL and have received the mortgage offer, then contact Santander to port your existing mortgage. Although in theory you will be moving an existing mortgage, in practise it's treated as if you were applying for a brand new one (albeit with the old terms and rate), so you'll have to go through the whole process again.

The important thing with regard to the BTL is to show that your rental property is not a liability. So long as, with the BTL mortgage, it's not going to make a loss, Santander are likely to ignore it altogether.

If that all works, you then arrange with your solicitor for completion on the two properties to happen simultaneously.

Re "keeping it in the family": note that some BTL mortgages specifically prohibit you from letting your property to family members.

Source: me! I've previously done exactly what I describe above.

EDIT: Regarding potentially selling or gifting to family: if doing this for a number that is well below market rate, there could be potential tax implications; you would need to consult an accountant and/or solicitor.

There are other options; for example, if you wanted a family member to share responsibility for the BTL mortgage, you could change ownership of the property so that you own it as tenants in common with unequal shares, with your relative owning a nominal share (e.g. 1%, or £1). Again, this is something to discuss with your solicitor before applying for the BTL.

Answer 2

The conditions laid down in this question seem to get weirder each time a comment is made and OP Keeno responds. Keeno writes

Currently I rent out my house (I have consent to let).

Does the house belong to you, in the sense that your name appears on the title deed as the sole owner or perhaps a co-owner of the property (subject, of course, to the interest of the bank which holds the mortgage? Whose consent do you have in order to rent it out? The co-owners' permission? The town zoning council's permission?

I wish to purchase a new house .....

According to one of your comments, you owe the bank £60,000 on the house you currently own at a very favorable interest rate. So where is the money for the purchase of the new house coming from?

I want to keep that house

Presumably this means that you want to keep the house that you currently have and also buy the new house. Then you want to

move the outstanding balance with the mortgage onto a new mortgage?

So the house you currently own will no longer have a mortgage on it, and the collateral for that £60,000 that you still owe the bank will now be the new house. Who will be paying the seller of the house you propose to buy? Suppose the purchase price is £100,000. Are you going to pay the seller £100,000 in cash (which, for nitpickers includes cheques, bank drafts and the like), or you going to pay £20,000 (20%) in cash and borrow the rest from the bank at the same low interest rate?

• If you do have the full purchase price of the new house to pay the seller, why not do so, and keep the current house (as you want to do, anyway) with its mortgage with its delightfully low interest rate?

• If you want to put 20% down in cash and borrow the rest (£80,000) from the bank, you now owe the bank £140,000 on a house that is worth only £100,000, and no money at all on the other house on which the mortgage was originally issued. Can you think of a reason why the bank might not be willing to accept this modification to the terms of the current mortgage?