To equitise....or borrow more????

mmdp4wy2

Hey guys,
So my predicament. I'm a first time buyer... Buying a £150k house. I have a £65k deposit, so borrowing £85k. I also want to buy another house to-let in the near future. So now, I'm pondering the option to borrow another £25k in this first mortgage to keep aside and use as a deposit on the buy-to-let house....or the other option, to use the equity from the first house as a deposit...
What do you think guys? What is the cheaper option? In fact, which is the smarter option?

Thanks MSE addicts!!! :-)
Oh and hope you are all having a cheap and cheerful Merry Christmas!

Will

Thrugelmir

Do you have six months savings put aside in the eventuality of emergencies or unforeseen circumstances?

Does £25k cover the required deposit for a BTL and costs of buying property etc?

Do you hold any other assets? Buying 2 houses will mean than you are at risk if property values fall. Always best to diversify.

Leveraging up has produced spectacular gains from 1999 to 2007. Now the downside is that the market correction will create the reverse. Even just a 15% fall will result in a large loss of capital.

mmdp4wy2

Thrugelmir wrote: »

Do you have six months savings put aside in the eventuality of emergencies or unforeseen circumstances?

Does £25k cover the required deposit for a BTL and costs of buying property etc?

Do you hold any other assets? Buying 2 houses will mean than you are at risk if property values fall. Always best to diversify.

Leveraging up has produced spectacular gains from 1999 to 2007. Now the downside is that the market correction will create the reverse. Even just a 15% fall will result in a large loss of capital.

Thanks for the reply. I have income protection which has a 0 week deferred period, and I have life protection/critical illness cover. So should be okay on that front.
Well, the £25k should cover a deposit on an auction property which I wish to renovate.
I have no other assets!
So I guess you are leaning towards borrowing more? Instead of using equity??

Cheers...

dimbo61

Have a look at an offset mortgage and put down 25% deposit to get the best rates and then put the rest into the offset account !
That way you have instant money to put down as a deposit and pay for work IF you can afford both properties,
Perhaps buy you first home and live in it for a year to see ALL the running costs then consider BTL

Thrugelmir

mmdp4wy2 wrote: »

So I guess you are leaning towards borrowing more? Instead of using equity??

Personally I prefer cash when investing. Leveraging with debt requires a repayment plan. My questions were more to widen the debate.