Could we take out a joint mortgage?

Q My partner and I each own flats in London. Mine is worth around ?200,000 and my partner's around ?150,000. I have only ?10,000 outstanding on my mortgage, my partner has around ?50,000. We have decided we would like to buy another house and move in together. We are thinking of selling my flat and taking out a new mortgage for around ?200,000 to enable us to purchase a house at ?400,000. We could afford this on the basis of our current joint income.

My partner would let out his property and the rent from this would help to subsidise our joint mortgage repayments.

Will my partner be able to take out a joint mortgage with me if he has a current mortgage on his existing property? Will he need to convert this to a buy-to-let mortgage? We understand that there may be capital gains tax issues if my partner later decides to sell his flat after having not lived in it as his main home. Since his flat has doubled in value since he purchased it five years ago, this could be significant.

LR

A When mortgage lenders are considering whether to lend money or not, they take into account the total financial background of the potential borrower(s). Your partner's existing mortgage, although on a different property, would be viewed as an outstanding loan and could reduce the amount you can borrow jointly; in effect you would be borrowing a total of ?250,000.

In theory, the flat rental will increase your income but it is not certain that a lender would take this into consideration.

There is also the question of whether the Inland Revenue would allow the interest on the old mortgage to be offset again the rent earnings.

In these circumstances I would suggest you consult a specialist mortgage broker who will be able to let you know what is possible.

If your partner does retain his flat for renting purposes there probably would be a capital gains tax liability should it be sold. However, allowance would be made for the period during which it was his principal private residence and if the flat is sold within a relatively short period there may be no liability at all.