Getting a second mortgage on house from auction

nazjon

Hello all,

I am new to posting on the forum but have been looking for a few years. Now I have a bit of dilema and need some advice or help so hoping you guys have some ideas!

My situation is I own a 2 bed house worth around £175000, mortage is approx £96000 so have plenty of equity. I am desperately trying to move to a bigger house (3 bed) with garden as dont have one at moment and have just had second child. Ideally I want to keep my current house and rent it out as I am not selling due to poor market at the moment. My mortgage is fixed until May 2012 on very good rate and there is £3000 fee if I come out of it so I do not want to remortgage and change it to Buy to let mortage at this stage due to this.

I have seen a perfect house which is going up at auction for £120000 but I would expect to pay at least £150000 for it having done my research.

I have access to around £20000 as deposit although I would not spend all this on deposit ideally.

Now the situation is can I buy this house on just a standard mortgage and live it whilst renting out my current property?

Or can I buy this house on a buy to let mortgage but live in it whilst I rent out current property meaning 25% deposit which I would struggle to make?

I am not sure how the fact it is a auction purchase might complicate things but I am sure it does somehow!!

Are there any other potential options anyone can think of?

Thanks in advance

Jon

Annisele

Do you know why "perfect house" is being sold at auction? Are you absolutely certain that it's mortgageable?

If you're buying at auction, you have to do your due diligence (solicitor, surveyor and finances) before you even start bidding. If you win the auction, you'll need to complete within a certain period (I believe usually 28 days). If it turns out that you can't get a mortgage on that property, you'll be stuffed - so you have to pay a solicitor etc before you have any idea if you'll win the auction.

If you buy a house using a residential mortgage, you either live in it or get consent to let. If you buy using a BTL, you don't live in it. Getting those wrong will put you in breach of your mortgage conditions.

Do you have an income to support two mortgages if you can't let out the first?

Thrugelmir

After the auction you'll need to deposit 10% of the purchase price. You also be contracted to complete purchase within 28 days.

May be worth exploring the mortgage options first, before getting carried away.

dimbo61

You maybe able to "port" you current mortgage to a new bigger property but unless you are earning a very good income having 2 mortgages would be difficult.
So better to sell and move to bigger 3 bed house and put down good deposit( equity from existing home) plus use the £20K in savings to pay fees and have emergency savings

nazjon

Thanks for the replys! ok got a bit carried away with the 'perfect house', I should say its the right house with everything I need and want for a lot less than you normally have to pay! Obviously at the price needs a lot of work but has the potential which is what makes it ideal. I think it was repossessed but I do not have the information pack from auction house yet as it is not available until closer to auction date. It is an ex council house in a new town so should be well built and of normal contruction. To be honest I do not know why price is so low until I get info pack but it is a mess at moment with boards up over the windows just as a precaution to vandalism I think, there are relatively new pvc windows underneath as I checked.

Anyway yes I could support 2 mortgages at moment as my first is relatively low and hoping to only have mortgage of around £130000 max for second property. I know all the details about the auction, I will have the 10% deposit I just need the mortgage in principle confirmed which I am going to bank about in the next week. I will be contacting solicitor and getting a surveyor to do survey before I go auction.

I was hoping to keep my 2 bed house as investment (sorry I didnt make that clear) and rent out (as I am not selling at a potential loss plus I do not have time to sell it, we need a house now), it is on a new development next door to train station direct to London in 30 mins so will rent easily and I would be getting a very good yield on it so really want to keep it. Only problem is I cannot change the mortgage type on it without a penalty fee of 3k.

From the replys so far looks like I dont have the options I suggested! Do lenders sometimes not let you Let out a property if you become an accidental landlord like I potentially would, then when the term is up I can change to BTL mortgage? Sorry I know I need to ask my lender this but was just wondering if anyone had any experience of this?

nazjon

porting my current mortgage to new bigger property and then changing the mortgage on current property to BTL, is that what you mean dimbo61? sounds like an option if they would do that, I suppose its in their interest too as means I stay with them and cannot go to another lender so they keep a solid customer!!

kingstreet

You can't port your current mortgage deal to a new property without selling the first property, which you're trying to avoid. Porting is transferring the old interest rate from your old mortgage to a new mortgage on a new property.

As mentioned earlier, you need to get consent to let from your current lender to enable you to tenant that as soon as you're ready. Look at the implications of becoming a first-time landlord.

At the auction, you'll need to pay 10% deposit on the day and you won't have much left after that anyway, so a 90% mortgage is going to be needed. You have no option but to approach this as a residential, so it's a good job the new property is the one you plan to live in.

Before you do anything else, appoint a solicitor and get them down to the auctioneers' office to view the deeds, contract, searches etc. They will all be ready for viewing. If these look ok, get a mortgage application in to a lender who'll ignore the first mortgage now you're letting the property, or at worst who'll treat it like a loan and knock the monthly cost off your affordability. Can you afford both mortgages if you work it out that way? It might be better to use a broker if you aren't sure about this.

Once the property has been surveyed and the lender is happy with you, and it, you should be ready for the auction.

nazjon

thanks kingstreet thats just what I needed to know! If they treat it as loan it will be a stretch with what they would let me borrow but should be ok! I was not too impressed with the advisor at lender before so may go down broker route.

Any idea on the sort of fees solicitors charge for the initial service you have suggested? Can i go to auction house to view these details aswell?

kingstreet

nazjon wrote: »

thanks kingstreet thats just what I needed to know! If they treat it as loan it will be a stretch with what they would let me borrow but should be ok! I was not too impressed with the advisor at lender before so may go down broker route.

Any idea on the sort of fees solicitors charge for the initial service you have suggested? Can i go to auction house to view these details aswell?

Solicitors fees will probably include a supplement for them leaving the office to look at the auctioneer's file. Ring a few near the auctioneer's office to get an idea.

AFAIK, there's no reason you can't look at the details. Last auctioneer I worked at used to allow potential purchasers access to the searches etc.

nazjon

kingstreet wrote: »

Solicitors fees will probably include a supplement for them leaving the office to look at the auctioneer's file. Ring a few near the auctioneer's office to get an idea.

AFAIK, there's no reason you can't look at the details. Last auctioneer I worked at used to allow potential purchasers access to the searches etc.

will do! thanks for your help

nazjon

UPDATE: well I have spoke to my brother who is Architect and we suspect it is an 'Airey house' at the price and look of other houses around it although this one has been bricked up and looks like it has had the work done to make it mortgageable, looks like it has all new windows etc too so quite a recent job. I have contacted the auctioneers and asked the relevant questions in relation to this like if it has PRC certificate for the work etc and am waiting for them to get back to me.

Looks like this is going to be a headache for me as its ideal but dont think I will get a mortgage on it!

Anyone have any experience in gettng mortgage for an Airey house which has had all the work done to make it mortgageble and PRC certificated??