First time buyers - BUT!

hinchy55

Hi everyone,

Looking for some help on our situation, it's a difficult one to search for other threads!

The gf and I are looking to buy a place.

£300k target
10% deposit
First time buyers
Both in good jobs, around 75k salary combined.

So there's mortgages available. BUT a slight twist- I think a positive one.

I already own a house that is rented out. It is in my name and fully paid for (folks' gift and is almost 7 yrs now so fully transferred!)

This is probably worth around £150k.

Is there a benefit to using this property as security on a deposit? And if so how could it work?

Initial thoughts were as follows.

£30k deposit
£150k bank loan with the deeds of house 1 as security
120k mortgage on balance.

Am speaking to an IFA this week, but wondered what you guys thought.

Thanks,
Colin

Dave_Ham

Hi Colin,

Not many lenders will take equity as a deposit, although you can possibly still structure this to your advantage.

You can raise money on this property on a let to buy basis (rates are coming down on buy to lets) and therefore this can put you on a 20-25% deposit level, which will dramatically reduce your rate on the higher balance mortgage.

See the broker, but my gut says this is the best way forward and will bring your overall "mortgage cost" down..

hinchy55

Thanks for the quick response Dave.

Not quite sure what you mean.

Are you suggesting an option might be to release £20-25k on house 1 to increase the initial deposit? This would then have a separate repayment plan to the other mortgage which would the be for £225k?

Hope that's clear!

Dave_Ham

Spot on - you will have 2 mortgages, although the net payment will be for the same value but costing less.

This is a gut instinct though, as do not have enough information although think it would stack up cheaper.