Advice On New Mortgage Required To Buy Second Property – LTV 90%

Bonkjas

Hi there – first time on this forum so would appreciate as much advice as possible

• Currently own outright (no mortgage) a 4 bed property worth about £180k to £190k. We both work full time with a joint income of £95.4k
• Looking to move house to a property that is likely to cost us about £370k.
• Toying with the idea of renting out our existing property (Should get circa £800 pcm) and taking out a mortgage on new property over a 15 year term due to our ages (me 47, wife 41). Can put down about £40k from savings leaving a mortgage of circa £330k (LTV circa 90%) which we can afford.

Questions

• What is the best repayment mortgage on offer for the above scenario. Best offers seem to be where you have a LTV of 50% or over? Can you negotiate with banks /building socs to get one of the better deals?
• or would it be worth taking out interest only type mortgages over short term periods and periodically pay off chunks when term ends to reduce amount owed with:-
  • Savings + monthly rentals from existing property
  • Yearly work bonuses
  • Endowments that mature in next 1 to 7 years (£15k – Aug 2011, £3.5k – Feb 2010, £24k – Jan 2017)?

Obviously we have the contingency to sell existing property if rental market is poor and/or property prices increase significantly in 15 year period making it much more viable to sell existing house and pay off newer mortgage

• Seem some forums talking about BTL and LTB mortgages etc, do we need one of these?
• Or any other invaluable advice you can give us would be greatly appreciated…..:)

phlash

Its not if the rental market is poor....it is at £800 per month for a £180k asset.

Minus voids, fees, tax etc your money is better off reducing your loan on the new property. If the new mortgage is 6% interest, then you would need greater than a 6% return on the rental property (net of everything). At the moment I think your return would be 2-3% all things considered.

Need to read BIM45700 as well if you're going to let it out, as at the moment you may not get a tax deduction on loan interest if you were to let it out.

As with a lot of BTL ventures, your model is based on capital growth. First look at the rental profits and everything else will follow.

getmore4less

£180k, £800pm, gross yield 5.3% on the low side not worth the hastle.

happybroker

Bonkjas wrote: »

Hi there – first time on this forum so would appreciate as much advice as possible

• Currently own outright (no mortgage) a 4 bed property worth about £180k to £190k. We both work full time with a joint income of £95.4k
• Looking to move house to a property that is likely to cost us about £370k.
• Toying with the idea of renting out our existing property (Should get circa £800 pcm) and taking out a mortgage on new property over a 15 year term due to our ages (me 47, wife 41). Can put down about £40k from savings leaving a mortgage of circa £330k (LTV circa 90%) which we can afford.

Questions

• What is the best repayment mortgage on offer for the above scenario. Best offers seem to be where you have a LTV of 50% or over? Can you negotiate with banks /building socs to get one of the better deals?
• or would it be worth taking out interest only type mortgages over short term periods and periodically pay off chunks when term ends to reduce amount owed with:-
  • Savings + monthly rentals from existing property
  • Yearly work bonuses
  • Endowments that mature in next 1 to 7 years (£15k – Aug 2011, £3.5k – Feb 2010, £24k – Jan 2017)?

Obviously we have the contingency to sell existing property if rental market is poor and/or property prices increase significantly in 15 year period making it much more viable to sell existing house and pay off newer mortgage

• Seem some forums talking about BTL and LTB mortgages etc, do we need one of these?
• Or any other invaluable advice you can give us would be greatly appreciated…..:)

The more equity you can offer a lender the better the rate will be and this will apply to mortgages taken on either or possibly both properties.

There may be some milage in looking the possible benefits of raising money on your current home by way of a btl mortgage to boost the deposit on the new property which will give you access to lower rates for the bulk of the borrowing.

I think a good broker may prove their worth here, family and friends are a good place to start for a recommendation.