Buying a second house?

newwife

Hi everyone. I’m new to writing the forums although I’ve been reading and following advice for a good while. I’m hoping for some advice about which direction to go in. This is my situation
1. I have a mortgage on a house in Wales that I have tenants in. I’m waiting for my end of year mortgage statement, but expect there to be around £24,500 left to pay over a nine year term. My tenants bring me in enough income to pay the mortgage, estate agent that manages it, the tax man and a little more for me! The house is worth around £120,000
2. I currently rent a house in Manchester with my husband, paying £700 a month.
3. I earn £25,000 a year, my husband is a freelance worker who earns around the same but was made bankrupt a few years ago and has not been released from this yet. Our finances are completely separate.
4. We’d like to buy a house in Manchester, around the £220,000 mark
5. I’ve just received a cheque for £25,000 from a great aunt, which was a total surprise, but hopefully will help us on our way to owning another house.

What I’m wanting to know is the best way to go. I’d like to keep my house in Wales as an investment, as it is looking after itself. I don’t know whether I would be considered for a second mortgage of the amount I want, as my income x5 plus my £25,000 cash wouldn’t get me anywhere near where we’d like to live. Or is selling my Welsh house the only way for me to go???
My head is spinning…I’ve even contemplated using my cash to pay off the mortgage, but realise that I would then have a huge tax bill for my income from being a landlord without the interest charges to count against. I’d appreciate any help/suggestions to guide me before I approach any banks/building societies/financial advisors etc.
Thanks in advance, newwife

herbiesjp

Welcome to the board

DO you live in the Wales house with your tenants?

YOu can convert this property to a BTL mortgage - or get consent to let from your current lender.

At the same time you can release some equity from the property, to put down as more of a deposit along with the £25k. However the rental income would need to be assessed as the whole house being let out on an AST, and the lender would use this market rate to determine what mortgage amount they could agree.

Having these two lump sums, could mean a higher deposit and a being able to get a mortgage for the new property

Have a word with a fee free whole of market adviser after reading Martin's article

HTH

MortgageMamma

How much is left from your rental income after the mortgage, letting agent and insurance has been paid?

newwife

Thanks for your reply. I have printed off the mortgage guide from the site and am starting to look through this and the other advice but there's a lot to consider!
I live in Manchester, and am renting there.
I have consent from the Welsh house mortgage lender to have tenants in. They are charging me an extra 1% on top of my mortgage interest rate for this. If I change my mortgage to a BTL will that increase the interest rate further? Or will that just depend on the deal?
Thanks NW

MortgageMamma

Hi Newwife

I moved away from Manchester 2 years ago which part are you in I lived in Worsley and the rental prices there were extortionate being so close to the trafford centre.

Regardiing your mortgages I will do my best to help you here but the best thing you could do is sit down with a whole of market mortgage broker, get them to assess the situation with your buy to let property and see if they can save you any money on that, and also if its prudent to borrow some money on the property to put a larger deposit on your new home.

Also you will need to take some advice on your new purchase - particularly as you are buying in your sole name - a broker would be able to assess your income to debt ratio and give you the maximum amount you could borrow so you could then judge how muchh money you would need to borrow on the buy to let property

HTH

MM

herbiesjp

newwife wrote:

I have consent from the Welsh house mortgage lender to have tenants in. They are charging me an extra 1% on top of my mortgage interest rate for this. If I change my mortgage to a BTL will that increase the interest rate further? Or will that just depend on the deal?
Thanks NW

It will depend on the deal - what is the interest rate and lender?

You may well be into BTL territory rates anyway, seeing as they are charging an extra 1% on top

newwife

MortgageMamma wrote:

How much is left from your rental income after the mortgage, letting agent and insurance has been paid?

I have £157.64 left after paying the above, each month.

NW

newwife

herbiesjp wrote:

It will depend on the deal - what is the interest rate and lender?

You may well be into BTL territory rates anyway, seeing as they are charging an extra 1% on top

My current mortgage is with Newcastle BS. I am paying 6.49%, which is a 1.60% discount rate, with 1% added for me having tenants in.

NW

newwife

MortgageMamma wrote:

I moved away from Manchester 2 years ago which part are you in I lived in Worsley and the rental prices there were extortionate being so close to the trafford centre.

Regardiing your mortgages I will do my best to help you here but the best thing you could do is sit down with a whole of market mortgage broker


MM

I really appreciate your input. I'm trying to think things through and have all the information I need before approaching an advisor/broker so I can understand their advice, and have something to compare it with.
I want to buy just outside Didsbury, so both rental prices and house prices are inflated. But sometimes you get what you pay for in terms of the area.

NW

herbiesjp

newwife wrote:

My current mortgage is with Newcastle BS. I am paying 6.49%, which is a 1.60% discount rate, with 1% added for me having tenants in.

NW

You are paying well over the odds for the benefit of having tenants in there.

Yu can find a lot cheaper BTL rates, and those would include deals offering free legal fees, and valuations and relatively low arrangement fees

HTH

MortgageMamma

Hi Newwife

Sorry I was not online last night or I would have answered sooner. Herbiesjp is correct in that, if you are not tied into your mortgage on the property you let out, you would be better to remortgage onto a buy to let product and you could save yourself quite a bit of money in doing so. However you MAY have to pay abotu £500 legal fee's to facilitate that. In doing so you would make more profit from the BTL property and have more disposable income to put towards your income calculation for the new property.

You cold also look at taking some of the equity from the BTL property to enable you to put a larger despoit on the property you want to buy,

I know what the house prices are like in didsbury I used to go there a lot, but it is a really nice area and close to Manchester Centre so I guess you get what you pay for.

Will you be looking to buy a new build or perhaps something that needs a little work to increase its value? There are some lovely big victorian semi's with period features in didsbury and plenty that you could buy a bit cheaper and do up