Buying second house/renting first - advice please!

elt_3

Hi all,

I bought my house a few years ago, and was lucky enough to be able to buy it outright.

What I would like to do now is keep this house, and rent it out, and move somewhere slightly bigger/nicer/in a nicer location. I'm hoping to be able to pay off my monthly mortgage using the rent I get paid.

I'm just after some advice from forum members about this - because of a few years of job uncertainty, and having to take jobs that haven't paid very well, I dont have a huge amount in savings, so I don't have a full deposit for somewhere else. I'm also a little unclear on the whole mortgage process. Will the fact that I already own a property have any effect on me purchasing somewhere else? Would this allow me to take out a 100% mortgage, or will I still need the deposit money?

I'm really keen to move somewhere else, whilst still being able to make the most of this property by keeping a hold of it and renting it out...but at the same time, it's quite unlikely, for various reasons, that I'll be able to save up a deposit anytime soon. Any advice would be hugely appreciated!

BitterAndTwisted

The equity in your wholly-owned house is the deposit for another property.

lynneinjapan

I'd say that you're very unlikely to get a 100% mortgage.

You may be able to take out a small buy-to-let mortgage on your existing place to raise the deposit for your new place, and then take out an owner-occupier mortgage (which will probably be at a lower rate) for the balance of the price of the new place.

Alternatively, take out the maximum BTL mortgage you can - the interest rate will be higher but you can offset all the interest paid against rental income, which will reduce your tax liability.

This is all assuming that your income is adequate for you to qualify for a mortgage. Usually you need an income of £25K to get a BTL mortgage (max LTV 85%), and the owner-occupier mortgage is based on income multiples (max LTV 90%).

CLAPTON

well facts always make it easier to comment

what is your current property worth
how much rent can you get for it

what's your income
what deposit do you have
what price is the new property

what's do your credit files say

CLAPTON

BitterAndTwisted wrote: »

The equity in your wholly-owned house is the deposit for another property.

only if sold and cash realised or mortgaged

G_M

And for the rental side of things....

https://forums.moneysavingexpert.com/discussion/3703933

elt_3

Hi Clapton,

In answer to your questions:

what is your current property worth: About £320k, give or take
how much rent can you get for it: About £850 a month

what's your income: £23k
what deposit do you have: On my way to saving it up, but at the moment no deposit.
what price is the new property: I'd be looking for something around the £400 450k level.

what's do your credit files say: Good credit, no issues here.

CLAPTON

broadly speaking with an income of 23k you might get a mortgage of about 80-90K
so you need to have a deposit of about 310k to 360k

a mortgage provider may take the rental income into a/c but I see absolutely no prospect of you gettting sufficient mortgage with no deposit
but you may wish to consult a mortgage advisor

your only serious option is to sell the property and then buy

kingstreet

If you remortgage the current property, realistically you'll be able to borrow no more than £163k. With a maximum residential mortgage of around £80k based on your earned income, that's a total purchase price of £243k for a new home.

You'll need to sell the first property to be able to get a new home for anywhere near £400k.