Mortgage free but tempted

Cannygirl_2

We own our house outright. It may sound mad in the current climate but we would like to buy another property over the next 1 to 2 years without selling the current one. This would involve going back into the mortage market after 2 years but we would have a deposit of roughly 20%.
My question to anyone who knows is: would a lender give us a better deal because we have the security of already owning one property outright?

_Andy_

No, the lender only cares about the percentage you're borrowing on the home they're helping you finance.

sdooley

Well you could get a small mortgage on your own home to reduce the debt you need to take out on the buy to let. But it seems an odd time to be getting into that line of business.

JimmyTheWig

Is the new place going to be worth more or less than your current one?
You may be better off getting a mortgage on your existing house and paying cash for the new one.

Cannygirl_2

Thanks for the advice, guys. I'm considering a place worth less than the one I already own. Yes, I know it sounds a bit mad amid the credit crisis. But if prices are going down and I'm not trying to sell, it may put me in stronger position. Plus how much higher are interest rates going to go? At the moment, cash on deposit is doing OK but if rates come down over the next year, borrowing sometime in the next 18 months could be feasible. Thinking of a small property in Central London, which I imagine might be a good investment but I'm only just beginning to research the whole deal.

JimmyTheWig

In that case, I'd definitely look into mortgaging your existing place.
You could borrow the amount of money that you wanted, but would be a smaller loan to value - i.e. you would have a bigger "deposit".
This would also put you in a good position in terms of buying. In the current climate you should be able to get a good deal from a seller who wants to move and a cash buyer must be even more desirable than when under normal circumstances.

The only downside is that to be a cash buyer I guess you couldn't have the mortgage going through on the same day as the purchase. Which means paying interest on your mortgage for longer than you need to. You'd just have to get the best savings account you can and hope to complete sooner rather than later. If you (and/or your spouse if you have one) don't pay tax on interest then you are not likely to be losing much money during this time.

herbiesjp

What areas of london are you looking at?

What prices are you looking at? Have you seen would kind of rental income the property/area can demand?

Cannygirl_2

Looking for one bed or studio within thirty mins walk of Oxford Circus, west or north.
Between 300 and 400k. The idea to have it as pied a terre so haven't looked at rentable value yet.

Qual123

if you plan to let out the new place, then you will be far better of taking a mortgage against it rather than remortgaging you current place. if you are unencumbered on a buy to let property you will have to pay tax on all of your rental income. most landlords borrow 75-80% LTV to avoid paying tax.

dimbo61

consider offset mortgage as you could borrow the money and then pay it into the offset till you find the property you want with cash " in the bank " and fees / mortgage costs all ready paid.
Very different if this is to be a " buy to let"
Need to borrow money on property you are letting and most BTL loans need a
20/25% deposit and 125% rent to mortgage costs. GOOD LUCK