Mortgage confusion!

jonahea

I am currently mortgage free on my house that I own worth about £150k.
I am looking at an investment buy-to-let second property for £115k and plan to rent it out for about 500pcm. (Either private or to my son).

I was wondering if I could re-mortgage my current home and buy the second property outright or would I still require a hefty deposit??

In addition, has anyone got any thoughts on this being a good idea or not?

Dave_Ham

Yes, this is achievable although to optimise rates and therefore cost, you may want to consider raising most from your property and a small mortgage on the new place. This would allow you to play the loan to values.

Additionally, I personally think you will be empowering your equity and earning an income from in.

A fair bit will depend upon your age, income and employment in that order...

All the best...

Thrugelmir

jonahea wrote: »

I was wondering if I could re-mortgage my current home and buy the second property outright or would I still require a hefty deposit??

A lender would expect you to fund the deposit yourself. So you'd need to find 20% for a BTL mortgage.

Flugelhorn

I bought a second (and third )property with 100% of the money taken from equity in my main property. No one queried what I was doing.

Thrugelmir

Flugelhorn wrote: »

I bought a second (and third )property with 100% of the money taken from equity in my main property. No one queried what I was doing.

Recently?

Increasingly its a precondition of the mortgage offer being made.

bigadaj

Renting to your son could cause issues as you are linked.

Dave_Ham

Thrugelmir wrote: »

Recently?

Increasingly its a precondition of the mortgage offer being made.

Think you may be mis-reading the post. It is absolutely fine to capital raise on your property to buy another property, well with most mainstream lenders..

Additionally, if there is no buy to let in place then no issue renting to whomever. That said, most of the big players are happy with this scenario now in any case, it jut becomes a regulated sale and not unregulated...

jonahea

Thanks guys. This clears up a few my initial worries.
I will have a chat with a mortgage advisor to figure out my best option!

Thrugelmir

Dave_Ham wrote: »

Think you may be mis-reading the post. It is absolutely fine to capital raise on your property to buy another property, well with most mainstream lenders..

Not misread at all. Many lenders will expect the deposit to be funded by the potential borrower. Not funded by the borrowing applied for on the existing property. Basic risk management.

Many people built their property empires by leveraging on increased equity values in the boom credit years. Times are changing.

TrickyDicky101

Thrugelmir wrote: »

Not misread at all. Many lenders will expect the deposit to be funded by the potential borrower. Not funded by the borrowing applied for on the existing property. Basic risk management.

Many people built their property empires by leveraging on increased equity values in the boom credit years. Times are changing.

OP remortgages current property releasing £115k (c.75%) of existing property value (which as stated is currently mortgage free).

Op uses this £115k to buy new property outright.

Deposit doesn't come into it. I fail to see the problem, as Dave has already pointed out.

getmore4less

Raising the funds is only part of the equation.

Starting a business is the other side.

www.landlordzone.co.uk

Is a good resource for the ins and out of property business.

starting point is the gross yield(add all costs of purchase).

£500*12/£115000 = 5.22%

Then look at your annual costs, insurance, certificates........... say £500

4.78%


Factor in voids, maintanence..... say another £500

4.35%

Borrow money for less that that and there may be some profit if costs stay under control.

Remember rates are historicaly low, rates and rent are not linked.

It is important to make sure the rental business is sustainable and self funding long term otherwise it is just preperty speculation. Pros tended to look for 10% gross yields, 5% is marginal and only works because rates are very low.

Do you have additional funds/income available to support any cash flow issues early on, voids, maintanence etc. may not be an issue if family rental but it is not unknown for these to be a problem should they loose thier income, some find it difficult to evict a family member.