advice on getting another mortgage please

nanoos

Ok this is my situation:

I currently have a fixed rate mortage to 2014 at a rate of 5.65% and have a balance of 40,000.

I now need to buy a second home nearer to where i work. The price of the house is 120,000 so I need the full amount. I earn 37k pa and a bonus of 7% which is dependent upon company performance so usually equates to around 4%.

I would like to know what my best options are. Should i go for another mortgage and should i inform them of my first mortage. Or should i borrow against the equity on my first home which after having bought the house for 50,000 is now valued at 195,000.

Advice would be much appreciated.

Thanks.

UK007BullDog

1. They will know you have another mortgage as it will show up on your credit record. So the next lender will ask for proof that the property will be let out. You will have to do some research on the going rents for your type of property in your area.

2. As you are going to rent out the other property, the rental income will decide how much equity you can release from it. They are not looking at your income here but that the rental will cover the mortgage by up to 130%. During the equity release excercise they might switch it to a BTL mortgage but might not. It would be better in your future interests (tax reasons) to be honest with them, as any costs can be tax deductable from the profits (rental and growth of equity) you make. If you keep the property for less than 3 years you have no capital gains tax to pay.

3. Whatever equity you can get plus your income = purchase price.

You can multiply your income by around 4x some lenders give more some less.

Just updated the post.

nanoos

Thanks bulldog for the advice.

However I will not be renting out my main property as my family will still be living there. The other property will only be used by me during the week.
So do i still have the same options.

Ideally i would just like to take out a another mortgage but not sure if this would be an option!!

UK007BullDog

No, that completely changes everything.

Then they will go by your income. Are you the only income earner in your family?

They will take into consideration all outgoings you have. So releasing equity in the other property will not help you much as your mortgage will then increase, but might just be enough to get you going.

You need to speak to a broker who has access to niche lenders who do that sort of thing, but you might still need quite a bit of deposit to do this. once the broker knows all details they can tell you your options if it is feasible.

UK007BullDog

Maybe buying it as a BTL on interest only, and then later moving in yourself, maybe renting out a room as well if more than 1 bedroom, but you must make sure you can support both mortgages as you are liable for both.

nanoos

Thanks I will look for a decent broker now hopefully.

herbiesjp

What is the value of the first property? Can you raise anything out of this property first with your current lender?

Do you have any savings to cover deposit or fees?

nanoos

the value of the first property is now around the 195-200k mark. I paid 50k for it a few years ago.

I have savings to cover fees and maybe a deposit but not enough for a 5% deposit.

herbiesjp

nanoos wrote:

the value of the first property is now around the 195-200k mark. I paid 50k for it a few years ago.

I have savings to cover fees and maybe a deposit but not enough for a 5% deposit.

Why not go to lender number, and see how much they can lend you, on top of your current deal.

If they can len you the extra £120k you can then by the second property outright with the cash raised from property 1

Just a thought, as this way you can do what you want with property number 2, as you have no mortgage on it.

HTH

nanoos

if id did go for that option and bought the property outright....out of curisosity if for some reason i could not keep up repayments or something...would the bank only reposess the first home or can they take the second one aswell even though its fully paid off.

Thanks.

herbiesjp

They can only take the property on which they have a charge, so the first one