2nd Mortgage

scoobydoo05

Hi,

Can I rent out my current house and take a second mortgage to purchase another?

I have about 5% equity in current house - but have an agreement to let from mortgage provider.

I earn £40,000 a year - currently have £84,000 mortgage, but would like to by a property valued at £130,000 - with a £20,000 deposit.

Would I be able to get aqn additional mortgage without clearing my other?

Regards,

herbiesjp

As long as the rental income from the first property covers the mortgage payment, then this property will be "ignored" by the lender you will look at for your new residential properrty

So yes, you can then look to buy the new property with a mortgage of £110k

You'd better talk to an adviser, as in the current climate many lenders have changed their criteria on how they treat these properties in the background and an adviser should be able to find out straight away which lenders will be happy

silvercar

With so little equity in your current property, you could have problems when you come to remortgage it. If, at that time, it is already let you will need a BTL mortgage or be stuck on your existing lenders SVR. You would find it difficult to get a BTL mortgage with only 5% equity - impossible at the moment.

You may just be able to sort things out now, but you could be building up problems for the future.

scoobydoo05

ah, proof that this site is very useful! I had not thought of that at all...

I have 2 years left on a fixed rate - definetly got the cogs turning now

scoobydoo05

I enquired about a second mortgage from an IFA and was informed that I would need a bank statement showing the rental income and also a signed tennancy agreement - this concerns a mortgage from Nationwide.

I can understand the tennancy agreement, but see the bank statement as an obstacle as I will need to vactate the to-be rented property at the same time as moving into the newly mortgaged home.

Is this a normal requirement? I would of thought a signed tennancy agreement would be sufficent proof? As this would show the rental income to be earned?

herbiesjp

Nope - you will need both for Nationwide

A lot of lenders however will work off a rental assessment or an AST

scoobydoo05

We have hit another block - we intended for my partner to sell the house to me at a reduced price (110k, market value 130k) as we do not have a cash deposit. According to my IFA we will still in effect be taking out a 100% LTV mortgage, therefore cannot find a willing lender.

This all seems far to over complicated, with far to many obstacles.

Does anybody have any suggestions?

dimbo61

If you can rent out your property and move in with your partner then do that.
Save every penny and I mean every penny ( dont forget the TAX due to renting out your home plus costs of renting insurance, fees, estate agents etc ) and save as much as you can over next two years.
put money into cash ISA,s and see where you are in 2 years.
House values may have gone up and you will have cash to buy more equity in your home or sell it. GOOD LUCK

dimbo61

If your still with your partner in 2 years and have 2x £3600 in ISA,s plus overpaid mortgage by say £500 a month ( if allowed by lender ) you will have build up a 20/25% equity in your home and therefore get a buy to let mortgage easier.
Dont forget you also need to pay half the bills and mortgage with your partner at his/her house.

herbiesjp

scoobydoo05 wrote: »

We have hit another block - we intended for my partner to sell the house to me at a reduced price (110k, market value 130k) as we do not have a cash deposit. According to my IFA we will still in effect be taking out a 100% LTV mortgage, therefore cannot find a willing lender.

This all seems far to over complicated, with far to many obstacles.

Does anybody have any suggestions?

The £20k could be treated as a gifted deposit - so in effect not a 100% mortgage

You'll need to find a lender happy to accept this though

silvercar

scoobydoo05 wrote: »

We have hit another block - we intended for my partner to sell the house to me at a reduced price (110k, market value 130k) as we do not have a cash deposit. According to my IFA we will still in effect be taking out a 100% LTV mortgage, therefore cannot find a willing lender.

This all seems far to over complicated, with far to many obstacles.

Does anybody have any suggestions?

Who owns the property now? If it is your partners and you are going on the mortgage then it is a remortgage with you added to the deeds and the lender should consider the market value of the property ie 130k.

If you were going to buy it at 130k then immediately resell it, I don't understand how you could do that.