Buying A Second Property

plymouth_janner_boy

My Wife and I are loosely thinking about buying a second property in a few years time. The idea was to rent out the house we're in now and to move into a bigger house (we've just started a family).

The trouble is I haven't a clue what criteria we need in order to get a second mortgage. We're in debt at the moment, have an interest only mortgage of £112k, house is worth £130k, would be looking to buy a house worth £175k.

Could someone point me in the right direction?

BobProperty

Starting with another apparently stupid question but it isn't really, do you earn at least £50k?

Because otherwise this will be somewhere between a real stuggle and impossible.
House 1 value £130k, mortgage £112k, to be rented out. Rent will need to cover mortgage by 125%, so mortgage is about £600 a month, rent needs to be about £750. Is that going to happen?
House 2 value £175k, any deposit? Assuming not, or not much, you will need to cover let's say £170k mortgage, which will be about £850 IO. You've just started a family so there'll be some expenditure there and one of you won't be working all of the time just yet. The best (worst?) earnings ratio you'll get is about 5.5 so you need an income of at least £30k (but preferable £56k) to cover this mortgage. That's without any problems with house 1.
Why do you want to do this?

plymouth_janner_boy

Thanks guys,

currently the mortgage on our house is interest only and costs all but £500 a month. I have a friend who would rent our house but would have to get a renters valuation thingy to have an idea of what to charge.

In order to get the mortgage for the second house without using salary multipliers (im only on £26k) I'd have to use my father as a "gaurantor(how do you spell it??)" and borrow what we can afford to repay on an interest only again.

I'm in dream world a bit here, the only reason I want two properties is to make some money. I know a few wealthy guys who all started by buying numerous properties. I just thought I'd start looking into it.

BT_man

plymouth_janner_boy wrote:

I'm in dream world a bit here,

I agree..

plymouth_janner_boy wrote:

the only reason I want two properties is to make some money. I know a few wealthy guys who all started by buying numerous properties. I just thought I'd start looking into it.

I bet they wouldn't buy multiple properties in today's housing market...

realwildone

Your in debt and have an IO mortgage.

Dont you think you should sort them two out first.

gallygirl

realwildone wrote:

Your in debt and have an IO mortgage.

Dont you think you should sort them two out first.

I TOTALLY agree. You have virtually no equity and no means of paying off the capital - yet you want to borrow MORE??????

Sorry, but this sounds like a potential 'car crash tv' scenario. What if your friend leaves and you can't get another tenant? What if you get another tenant and they stop paying rent? Do you have any idea how long it takes to get rid of them? How will you pay the mortgage in the meantime if you're in debt already? How will you repair the house if they wreck it?

Sort out your OWN mortgage first and forget about 'get rich quick' schemes!

tomstickland

I'm in dream world a bit here, the only reason I want two properties is to make some money. I know a few wealthy guys who all started by buying numerous properties. I just thought I'd start looking into it.

Correct self analysis.
Your idea makes the alarm bells ring. In debt, IO mortgage and a vague notion about making money.

These wealthy guys did alright out of massive property price inflation; they bought when houses were cheap and in the last 5-6 years the houses have increased in value massively. Meanwhile, normal rental levels are enough to cover their mortgages because they bought when houses were cheap. I don't see that happening again - just imagine house prices doubling in the next 4 years; do you think that's feasible?

plymouth_janner_boy

I was anxious before posting but ignored my gut feeling (big mistake!), i am going through a tricky "i need to make money" phase!, it happens every so often. I agree with you all and will turn my efforts into reducing the debt through good old honest hard work.

Thanking you all for your time.

gallygirl

Whew!!!! Am glad you are prepared to take good advice!! So, take this advice now - get onto Debt Free forum. Post your SOA (statement of affairs, sticky at the top of the page which shows how) and see what ideas people can come up with to help you make savings - this has the same affect as increasing your income.

Have you signed up for quidco, pigsback etc? They can bring in extra bits & pieces to throw at your debt. Once that is cleared and you've sorted out a repaymnent plan for your mortgage then we'll work out how to make your 1st million:rotfl: :rotfl: :rotfl:

Finally, was down in Plymouth for a meeting last Friday - looked nice what I saw of it, but why does it have to be so far away ?