Mortgage on a house bought with cash.

jimcrock

I bought a house last year for cash at £78,000. I now want to purchase a second house to rent the rooms out and also for somewhere for me to stay on occasions as it is nearer my work. The value of my current property is around £120,000. Is it possible to get a mortgage of £60,000 to use as a deposit for the buy to let? The buy to let is £120,000 so it would be a 50% mortgage.
Any thoughts or ideas greatly appreciated.

The_J

Yes it's possible. It might be tricky to find a surveyor who will value your property at 120k given that properties don't tend to increase in value by 50% in a year.

If you have done work on the property you may be expected to provide evidence.

HappyMJ

jimcrock wrote: »

I bought a house last year for cash at £78,000. I now want to purchase a second house to rent the rooms out and also for somewhere for me to stay on occasions as it is nearer my work. The value of my current property is around £120,000. Is it possible to get a mortgage of £60,000 to use as a deposit for the buy to let? The buy to let is £120,000 so it would be a 50% mortgage.
Any thoughts or ideas greatly appreciated.

Why not get a 75% mortgage to use as a deposit on the second property? You will need an income to support the mortgage and the mortgage taken out on the second property can be backed with the rent received. Do you live in your current property? You would get a lower interest rate on an owner occupied mortgage so could save quite a bit.

jimcrock

It was a reposession which is why it was that cheap. I have spent a bit on new bathroom, carpets and decorated throughout. The garden is also in the process of being done.
Would i need a deposit to take out a mortgage on my current property even though I actually own it outright?

Thrugelmir

Where you may struggle is not having any deposit in hand for the new property. A lender will be more reluctant to release equity where the 2nd property is to be funded entirely from debt.

RenovationMan

Thrugelmir wrote: »

Where you may struggle is not having any deposit in hand for the new property. A lender will be more reluctant to release equity where the 2nd property is to be funded entirely from debt.

Sorry Thrugilmir but this doesn't make any sense.

Thrugelmir

RenovationMan wrote: »

Sorry Thrugilmir but this doesn't make any sense.

Lender 1 may decide only to release money with conditions attached. Whereby the money will only be released to a solicitor for the purpose of purchasing property 2 if the vendor injects capital themselves i.e. a cash deposit.

RenovationMan

HappyMJ wrote: »

Why not get a 75% mortgage to use as a deposit on the second property? You will need an income to support the mortgage and the mortgage taken out on the second property can be backed with the rent received. Do you live in your current property? You would get a lower interest rate on an owner occupied mortgage so could save quite a bit.

I agree with this. From a taxation perspective, you're better obtaining a 75% mortgage (which is a high enough LTV to access practically all BTL mortgage products) and offset the rental income against the mortgage interest.

You might want to look at getting an offsetting mortgage on your home so that any profits from the BTL (post tax) can be put into your offset account. This will have the joint benefit of reducing your own mortgage payments and also provide you with an easy access to emergency funds for any maintenance/repairs or void periods.

RenovationMan

Thrugelmir wrote: »

Lender 1 may decide only to release money with conditions attached. Whereby the money will only be released to a solicitor for the purpose of purchasing property 2 if the vendor injects capital themselves i.e. a cash deposit.

Sorry, but this is more confusing. Are you saying that a lender would not be prepared to provide a mortgage secured against the OPs property, even though it will have a very secure 75% or 50% LTV?

I know lending restrictions are strict, but this would be ridiculous!

Thrugelmir

RenovationMan wrote: »

Sorry, but this is more confusing.

I can't write the explanation in any clearer English.

I know lending restrictions are strict, but this would be ridiculous!

Lenders have no need to lend. They can pick and choose the risks that they wish to underwrite. I can only repeat funds available for mortgage lending are contracting and will continue to do so for some time yet.

RenovationMan

Thrugelmir wrote: »

Lenders have no need to lend. They can pick and choose the risks that they wish to underwrite. I can only repeat funds available for mortgage lending are contracting and will continue to do so for some time yet.

Are you really saying that you think a lender would view the OP as a default risk and would therefore refuse to lend to him? I remind you that this is someone who will be getting with either a 25% LTV or 50% LTV mortgage and has indicated that he is currently in work.

Is that what you are saying? Seriously?