Buying a second house?

MortgageMamma

Just realised we have not asked you, do you have any outstanding credit such as loans, credit cards, HP, catalogues? If you do, and theres more than 3 months left to run on them could you give me the monthly payment amounts? This should enable us to look at your affordablity and max lending more accurately

newwife

MortgageMamma wrote:

Just realised we have not asked you, do you have any outstanding credit such as loans, credit cards, HP, catalogues?

I only have a car loan, I've just been thinking about resettling this and have been given the figure of £3850. My intention is to pay off the loan using my lump sum. I will then continue to pay the £290 monthly repayments but into my high interest savings account that the £25k (minus £3850 car loan) is sat in.

I'm hoping that you'll agree that I'm best repaying my loan (there is no early repayment charge) as my lump sum will not earn as much interest as I'm paying out on my loan.

As for the property, well I'm hoping to be able to offer to buy the house I'm currently renting. It is what I'd call partly renovated (ie they made a start but badly!) and I think would increase in value if renovated nicely.
If it isn't for sale, I'll be looking to buy something old to work on.

NW

herbiesjp

Having cleared the debt will no doubt improve your position.

With the loan still in force the lender will have to annualise the monthly loan payments i.e. 12x£290 = £3480 and then deduct that £3480 from your annual earnings before being able to agree a loan amount

The fact that the loan will be cleared will mean that you will have more options available to you and greater affordability

HTH

newwife

I've now paid off my car loan, which was a lovely feeling!
Would you say I have now thought about all the relevant issues to make me ready to approach an IFA?

herbiesjp

It sounds like it.

Know you are in a good position to talk to a fee free whole of market adviser.

This way you can discus in detail, the scenario araound raising enough from the BTL if you wish - enough to cover a deposit and fees on the new purchase.

You can then look at what best deal you can find to match your circumstances for the new property.

All systems go it looks like

MortgageMamma

HI Newwife

Just thought I'd let you know before you rush out and look for your mortgage, sometimes it can take as long as 30 days for the car credit account to show as settled on your credit reports, so if you use a lender with a heavily automated decision in principle system it will still deduct the car outgoings from your income before giving you a decision to lend/a max borrowing amount. I would suggest if you have not already that you sign up for experian and equifax's 30 day free trial, and monitor it regularly until you see the account as settled. Make sure you explain this to your broker as they may credit check you themselves and its vital they know its paid off.

Kind regards

MortgageMamma

herbiesjp

That's true MM, but the decision in principle will ask if debts are being cleared, so you can put it into the equation with the lenders.

I can see your concern here though.

newwife

Hi herbiesjp and mortgagemamma,

Just to update you, got a letter in the post this morning from our landlords informing us that they're going to sell the house, giving us first refusal. Obviously this speeds up the urgency on things. They will arrange for the house to be valued and go from there. We are not rushing to let them know we might be interested. I'm sure its in their interest to sell to us privately if we can afford to, as it would reduce the fees etc on their side.
I'm now going to phone a couple of independent FSAs to see what I can realistically raise.
I'll keep you posted!

nw

MortgageMamma

Hi Newife

Look for mortgage brokers rather than independent financial advisers. Mortgage brokers specialise in mortgages only. IFA's do a bit of everything so their knowledge can sometimes be spread thinly, a subject expert is what you need. Make sure they are fee's free though!

newwife

I've consulted both a financial advisor and a mortgage broker, for interest in how their opinions might differ!
The mortgage broker has come up with some great ideas and was very positive. She suggested scrapping my current Newcastle BS mortgage and borrowing 85% of my Welsh house on a BTL. She is confident that this can be done with fees thrown in.
This would give me approx £93k - 23 owing = £70k +21 cash to make a £91k deposit on the second house.
Based on borrowing £145k on the second house (includes enough to cover stamp duty and fees on a price of £230k) she has come up with approx figure of £846 per month for 25 years. As I am currently paying £700 pm rent, and have been used to paying £300pm on a car loan I've now paid off, this is easily in reach. This has even encouraged us to look at other houses up to
£250k.
This would be a self-certify mortgage due to it just being on my income, but sharing the house and expenses with my husband ,and his cousin who rents a room from us for £300 pm.

The financial advisor wasn't so hot and just seems keen to sell us life insurance with the mortgage!

How does this all sound to you guys???