Own home but need mortgage for second home

squeezefan

Hello all,

Hope somone can advise, as i'm getting really confused about this. My boyfriend owns his home outright, it's worth about £120,000. He's never had a mortgage. I rent from a housing association. We would like to buy a home together 300 miles away for about £160,000. I would move there permanently (i'm self employed so am keen to re-establish myself as soon as possible) and he would join me when he found a job there. We would then sell his home and use the money to pay a lump sum from any mortgage we would need for the second home. My questions are: What type of mortgage would we need to buy the second home? We don't want to be tied with a mortgage for a long period (ie 20 years), so are there short term mortgages to be had ?. What sort of penalties should we expect from a mortgage lender for paying off a large lump sum and can we even do that ?. Am i looking at this completely wrong and is there a really simple way of funding this?
Any advise really welcome, as this is doing my head in!

ViolaLass

How well do you each know the area you want to move to? The sensible option might be to sell, move and rent while you get to know the area and decide where you want to buy. Doing this would then mean you had the money upfront and could therefore access the best mortgage deals because you would have such a whopping deposit.

In terms of mortgages, you are very unlikely to be tied in for 20 years - it's usually 2-5 years (for a mortgage spread over 25 years usually, meaning that you might well move from one product to another to another through the time of your mortgage).

There may be penalties for paying off a large sum but it's easy enough to find products that don't have this.

If you want to buy now, do you have a deposit ready? How long have you been self-employed? Do you have records going back at least three years? If your boyfriend will be part of the application, the lender may not like the idea that he hasn't found a job in the area yet (or can he transfer through work?).

dimbo61

I would rent for 6/12 months and see if you like the place you are moving too and find the area you want to live in!
If your boyfriend puts his house on the market and see if it sells
If you do have a good deposit say 20% of the £160,000 so £32,000 and a good income to support a £128,000 mortgage then you can own 2 properties.
Your B/F could remortgage his home onto a Buy To Let mortgage if he wanted to rent out the house and use the money from the mortgage to put down as a deposit on the new property
Time to speak to a " whole of market mortgage broker " who deals in BTL mortgages

holly_hobby

2nd property purchase is perfectly permissible on a straight residential mge as your ptnr does not have any existing mge, with both you and your partner intending to live there (you now and you say BF a little later). You will need a deposit, 25% would give you the widest range of lenders and best product rates, anything less may restrict the lenders and deals available to you.

Bit of advice - I would recommend having the new hse as your BFs new main residence a) for mge & b&c suitability and b) it means that upon sale he will not have any CGT to pay on the period when it wasn't his main reisdence i.e from now until he moves up with his new job. I also imagine he will be with you more in the new house when you move in, than his current house.

He won;t have any CGT on the sale of his "old" home, if as I read it, it has been his main residence from its purchase. With the last 36 mths of ownership excluded from any CGT calculation in any event - thereby though he will cite his new home as his new main res, the fact that he has 36 mths from moving out to sell the propety before becoming expossed to CGT means he should avoid it altogether. (if of course his prev prop sells in the 3 yr period - if he is struggling to sell he could rent it out to ensure its occupied for security and for extra income - with a BTL mge effected if he wanted some of the capital out whilst it is waiting to sell)

Pch of 2nd prop (your new joint home) - as I say incomes will need to be sufficient to service all commitments inc new mge & you must naturally meet the lenders criteria and status checks.

Term - well its really up to you - the shorter the term on a repayment mge, naturally the higher the monthly repayments. But beware that if you find following completion of your mge, that you actually would require a longer term i.e the affordability of the monthly repayments start to have an impact due to increase in household costs, living costs, sociallising costs .. etc.. are higher than you anticipate, and you want to extend the mge term, from that originally selected, the lender will need to go through affordability and status checks & may not agree to extend the term for what ever reason. (not saying this will happen just something to consider when selecting your chosen mge term at outset).

Of course there is nothing stopping you in actually redeeming the mge earlier than any selected mge term (nb - there may be lender exit fees even if there is no mge product redemption fee).

If you choose an intererst only mortgage the term will not affect what the monthly mge payments are, as they are interest only, but any LTV over 75% will require evidence of a repayment vehicle, i.e ISA, Stocks & Shares, Bonds etc .. etc..

Paying a lump sum off - well if you choose to pay all or some of the capital obtained from BF hse sale, then you would need a completely penalty free product (either a penatly free tracker of straight SVR), as the capital to be repaid I would envisage would exceed the normal 10% annual cap.

If there are no penalty free mge produdts about at the moment, you could initially go onto the chosen lenders svr (which normally won't have redemption pens), and after you have made the lump sum reduction you want to make, you could apply to the lender to transfer from their SVR rate to a mge product. (indeed you can do this even if you choose a penatly free product too i.e switch to a more attractive deal that may have penalties (make sure you don't want to pay off any more monies exceeding lenders annual cap), but will have a lower mge interest rate)

Hope this basic guide gives you a place to start..... your next move is to visit with a whole of market broker who can source the best possible lender and product for you.

Holly

PS - other posts have been published before I completed this, so sorry for any overlapping or repeat of info already given ...

squeezefan

Thanks for the replies. You've given me lots to think about. We know the area really well, we've been going there for the last 10 years so we know it's where we want to be. Thank you so much for some great advice.

getmore4less

deposit do you have enough

home not near BF work (might raise issues)

you self employed moving to new area (can you show this will not effect your income do you have enough accounts