Am I able to rent my house and buy a 2nd home?

jojothefirst

Hi all.
Hope someone can give me some advise.

Me and my wife are currently living in a 1 bed house. We have 1 child and 1 on the way so need to move.
We have had the house valued at around £85000 - £95000 but have had little interest in selling it.
We also would have a £8500 interest free loan with retro which we only pay back when we move so have (if we took the highest figure), £25000 equity, or £16500 including the loan.
So I wondering if its possible to rent it out and get a 2nd home?

We Have a mortgage of around £70000 left on it and pay around £300 a month.
We can recieve at least £375 a month in rent.

Are total income is around £29000 a year.

I hear it is possible to provide proof of someone renting are property in order to get a 2nd mortgage. Is that correct?

We have recently paid of a loan which was costing us around £300 a month so we know we can afford to pay for a 2nd mortgage but will the banks give us the money?

Thank you in advance for any help.

Caz3121

How much deposit do you have for the new property?

Yorkie1

Yes, it is possible in principle.

But it will partly depend on your current lender. You currently have a residential mortgage based on the fact you live there. If you rent it out, you are breaching the terms of your mortgage. Therefore you need to ask your mortgage lender what their position would be if you rented it out.

Some will provide 'consent to let' for a fee (which might be quite high) &/or a raise in interest rate; others might refuse and insist you transfer to a buy to let mortgage. The latter will usually have higher interest rates, may require you to have a certain amount % of equity in the property and that the received rent is e.g. 125% of the repayment. In any event, in all likelihood it will mean that your monthly mortgage repayments go up - and therefore that the chances of you not covering the mortgage repayments are greater.

You would also have to factor in whether you could absorb void periods, or time when the tenant from hell doesn't pay / it takes months to evict / causes lots of damage. Without wanting to pry into your household circumstances, bear in mind that income may well drop during maternity leave.

And there's all the added responsibilities that being a LL involves - gas safety certificate, deposit protection, managing the property whenever the T contacts you. If you choose to get an agent involved, your rental takings will have their fee deducted before you receive them.

Lots to think about. I haven't commented on your specific £ figures as I don't know enough about this to do so.

jojothefirst

As it stands, about £2000 but will get more if needed. Also need to find out after I no if I can get a 2nd mortgage if then vender lifting deposits was a option or remortgaging my current house would be better.
My current lender is nationwide and from a small amount of research I believe they just need to be informed to allow me to rent it and don't charge. Not spoken to them though and that info could be dated.
Thank for the replies so far btw.

Yorkie1

jojothefirst wrote: »

My current lender is nationwide and from a small amount of research I believe they just need to be informed to allow me to rent it and don't charge. Not spoken to them though and that info could be dated.
Thank for the replies so far btw.

Your information is indeed out of date.

£50 letting application fee and a hike of 1.5% on the mortgage interest rate

http://www.nationwide.co.uk/mortgages/usefulinformation/letting.htm

stig.of.the.dump_2

Hi jojothefirst yes I belive you can do what you want,and I belive that it might work for you. There are various clubs organisations out their on the net,just google buy to let. Their are loads of people with lots more than one property to there name. Do lot,s of research and make your own choice ,Some will charge a lot for info some will charge a small amount. Best bit of advice I belive is listen to everyone take everthing in and then make YOUR mind up.
While I am not in the market at the moment this is something that I have done a bit of research on,and am very interested in pursuing
All the best.

lyndasharp

We tried to do something similar and the two lenders we approached (HSBC / Santander) did an agreement in principle and then subtracted the outstanding mortage from the AIP. The only way we could get them to disregard our existing residential mortage was to provide proof of rental income - which is obviously not possible if you're still living in it. The other option is to convert your existing mortgage to buy-to-let, which they will then disregard, and port your existing mortgage but you may not have enough equity. A third way could be to rent for 6 months yourselves, while letting your house so you can them provide them with the proof they need.

In the end, Santander would lend us enough for the second mortgage anyway, so we didn't have to jump through any of the other hoops - but that was with a higher joint income than yours, and a 20% deposit for the new place. If you need the equity in your house to provide a deposit to buy elsewhere, then I think you may have to think about dropping the price of your house to sell, or renting somewhere bigger until the market picks up.

Doozergirl

jojothefirst wrote: »

As it stands, about £2000 but will get more if needed. Also need to find out after I no if I can get a 2nd mortgage if then vender lifting deposits was a option or remortgaging my current house would be better.

Why is everyone so positive when you have a £2000 deposit for the next house? If it is possible, you will need a sensible deposit of at least 10% of the next house, even if you do consent to let your current place. I'm not sure your current lender would be up for re-mortgaging for a greater LTV to pay the deposit on the next place; there won't be enough in it.

Maybe you can do it, but you're going to have to find the deposit from savings, not borrowings.

brit1234

I can't see either where your deposit is. You have a little bit of equity in one place which is falling in value with the price falls.

With your loans I simply can't see where the money is coming from especially as banks choose customers who are less risky.

jojothefirst

Thanks for all the info. Some very helpful stuff there.
If we had to provide proof of are house being rented we could move out to my parents temporary or like has been suggested, rent somewhere else for 6 months and could possible build up more of a deposit and do more research as well.
My hope is to buy a house for around 80k and get 5% back through vender gifted deposit which would be 4k so I would need to get a extra 2k on top of my 2k I already have............. I'm thinking this is properly not realistic but I don't know until I get as much info as possible.

Running_Horse

A guy at work did this when things were a bit more lax.

The tenant on his first house is behind with the rent, making some payments, and may or may not continue to do so in the future.

Could you cover two mortgages if you had to?