Using Flat owned outright as deposit for own House

marathonic

I'm on the market for a property at the moment and have almost £30k for a deposit.

I'm currently living at home and would like to move out in the near future.

Like most people, I intend to live in a nice house eventually - and was intending to start off in the most expensive place possible.

However, I've now seen a 2-bedroom apartment in need of some work up for £30k. I'm considering buying this without a mortgage, moving in and doing most of the work myself over a number of months.

If I did this and then rented it out, could I get a residential mortgage and have it secured on my own house AND the rental property (using the rental property as the deposit)?

If not, I'm sure I'd save up a 10% deposit pretty quickly anyway considering the fact that my income would go up by £390 per month (less £35 rates and expenses).

However, I'm just posting to see my options. I'd assume that, should I need a 10% deposit, I'd still be in a position to get a bigger mortgage than I could now as I'd then have more income.

Dave_Ham

Hi there,

Your plan does sound like it has merit, £30k for a house seems crazy when I am used to London prices and it still makes me think twice.

That said, you will not be able to use the property as a deposit but can use the rental as income (subject to being fully declared)

You would need 10% as a minumum for next purchase, although be careful as some lenders will view you as an existing homeowner and may restrict to 85%, especially if not presented correctly.

Good luck

The_J

If the flat was worth a million pounds, and you earned a lot of money, then splitting a mortgage charge is possible but at these levels, nope.

You could raise a mortgage on that property via a BTL but this will generally only advance you 75% of the property value. You will have to have owned it for at least 6 months before you do it and even then, at these low levels (Consumer Credit Act covers up to 25k so you'll generally find mortgages only offered at that minimum), it would be a struggle to find someone.

marathonic

Thanks for the responses. Yeah, the flat is very cheap. It's in an okay area and would fetch about £90 per week rent.

I think that, even if I decide to move into the flat (I'm currently living at home but, at 29, would like to move out soon), I'd save up a 10% deposit very quickly - no mortgage and no car

The Capital Value of the flat (used in Northern Ireland for calculating Rates) is £51,000. I'm going to view it as soon as possible and will be bringing my dad who is a builder.

At these levels, I'd prefer not to go the BTL mortgage route because the mortgage fees are pretty high and I'd have a little extra conveyancing fees. With a £30k flat, my idea is to keep fees to a minimum.

For doing it up, I'd probably have a personal loan for a 1 year term. After that, with no mortgage, I'll be able to save about £1000 per month towards a mortgage for my own house. My ideal house would cost £150,000 so it'd take just over a year for a 10% deposit

So I think it looks like:

1. Buy the flat and move in;
2. Start doing the flat up;
3. Consider moving out and renting when complete
4. Save 10% deposit for another house

I understand that some mortgage options may not be available to me if I already own the flat but I suppose there's no point even thinking about that if it's going to be over a year or so before I intend applying (with rules changing as frequently as they are).

kingstreet

I was told by a colleague that Dudley BS is still operating a cross-charge facility. I haven't tested it, so can't vouch for its accuracy.

Crossed with OP's last post. Dudley won't lend in NI, so this post is somewhat redundant.