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Remortgage 1st home to buy 2nd home outright

whistlestop
whistlestop Posts: 3 Newbie
in House buying, renting & selling
Hi folks

I'm looking for some advice on how I could go about raising money from one house to buy another outright, or possibly get a 2nd mortgage?

I currently own a house valued at £260,000 with a £126,000 mortgage. I'm currently renting it for £900 per month with permission from my lender.

I've recently been offered another house in need of renovation for £60,000. I believe with minimal expenditure it'll be worth around £100,000.

I'd like, if at all possible, to re-mortgage (or otherwise raise finance on) the 1st house to buy the 2nd outright i.e. re-mortgage 1st at £186,000 (original £126,000 + additional £60,000) to pay off original mortgage and use the additional revenue to buy the 2nd.

The problem I'm up against is my relatively low income of £30,000. My current lender will not allow me to borrow the additional £60,000 and others I've investigated will not consider the rent I take in as income until I have several years of accounts.

I understand their concerns, but I believe it to be a wise investment decision - for the £60,000 I will gain an asset worth £100,000 which could be used as additional security.

Any advice would be greatly appreciated!

Comments

  • kingstreet
    kingstreet Posts: 38,754 Forumite
    First Anniversary Name Dropper Photogenic First Post
    The maximum BTL remortgage on the current let property is the lower of 75% of the value, or the mortgage amount reached by taking £900 / 125% = £720 x 12 = £8,640 / 6% = £144,000.

    The remortgage to BTL solution therefore leaves you short too.

    Talk to a broker and see if they can come up with a hybrid solution of renal and personal income.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • molerat
    molerat Posts: 31,817 Forumite
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    kingstreet wrote: »
    The maximum BTL remortgage on the current let property is the lower of 75% of the value, or the mortgage amount reached by taking £900 / 125% = £720 x 12 = £8,640 / 6% = £144,000.

    The remortgage to BTL solution therefore leaves you short too.

    Talk to a broker and see if they can come up with a hybrid solution of renal and personal income.
    A bit drastic selling a kidney to raise funds ? ;)
  • kingstreet
    kingstreet Posts: 38,754 Forumite
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    Blody wirles kebds! ;)
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • whistlestop
    whistlestop Posts: 3 Newbie
    Thanks for the reply kingstreet, and here's hoping I don't have to sell any organs!

    After giving your calculations consideration, researching the local rental market and estimating the cost of renovations, the following figures seem more realistic:

    * 1st property valued at £260,000 with a £126,000 mortgage. Realistic rent of £1,200.

    * 2nd property cost £64,000 (£60,000 purchase + £4,000 renovations)

    So based on kingstreet's calculations:

    * £1200 (rent) / 125% = £960 x 12 = £11,520 / 6% = up to £192,000 (so BTL is feasible)

    * Loan required is £126,000 + £64,000 =£190,000 (so I can just scrape in!)

    * LTV of is £190,000 / 260,000 x 100 = 73%


    I looks like by upping the rent to a more realistic level (given the current local market) I can just about manage a 75% BTL mortgage.

    Or have I missed something?!

    And any advice on comparison sites or broker services so I can do some research?

    Thanks!
  • kingstreet
    kingstreet Posts: 38,754 Forumite
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    All this will hinge on the lender's surveyor agreeing with your capital and rental valuations of the property.

    I cannot say what the chances of that might be...

    Ask friends and relatives for broker recommendations, or try https://www.unbiased.co.uk switching off the "sponsored ads only" option so you get a full list for your area. Try talking to a few and see what you think about them and their service/remuneration.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • martindow
    martindow Posts: 10,214 Forumite
    Name Dropper First Post First Anniversary
    Are you sure that you can buy your second house at 60k, spend 4k and then sell at 100k? I would imagine there is more work to be done to the house or you are over estimating its done up value.
  • whistlestop
    whistlestop Posts: 3 Newbie
    edited 13 September 2013 at 8:31PM
    Thanks for your responses folks.

    Kingstreet, the 1st property was valued about 16 months ago and the local property market has gone through the roof lately so I'm confident that the property and rental valuations are on the conservative side.

    Martindow, I'm buying the 2nd property from a relative who is aware that they're selling well below market value. I'm estimating 4K for a new kitchen and bathroom and I've done up properties before so I'm fairly confident of the final costs / value. I'll be living in the 2nd house so the resale value isn't a hugely pressing concern.

    And thanks for the 'unbiased.co.uk' recommendation - I hadn't seen that website before.

    Thanks again!
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