2nd mortgage complications!!

brad171080

Please advise.....

I own a property which i bought for 70k in 04 and is now valued at 90k. I have decided to buy another house with my partner and have had an offer 101k accepted over easter weekend. We wanted to borrow 105k to furnish etc. I gave my mortgage broker the details ie our collective wages etc and expexted rental income on my initial house which sits at the same as the mortgage repayments give or take £20 per month. My broker says we have fallen short and can only borrow 96k as most of the big lenders will only offer 95% mortgage as i already have an existing mortgage.

Sorry if im over complicating this but it's all new to me today. Basically we can't raise the extra 5k needed so my broker has advised me to re motgage my existing house to 80k thus releasing 10k to raise the 96k i have been offered to 106k. I would place the property im letting on an interest only mortgage so i don't feel the impact of the re mortgage too heavily.

Does this sound like a sensible step to take? im half convinced but need re-assuring. I'm of the assumtion that it's only really worth doing if i see through renting out the original property for a good few years.

Thanks!!!

MortgageMamma

There are two ways you could do this but without knowing the ins and outs of your circumstances I couldnt really say which one is best for you

1. Buy to let - you would remortgage your current property on a buy to let mortgage, this means that the mortgage is not assessed off your income but on the amount of rental income you would receive. A buy to let mortgage is an unregulated product, so does not afford you the same comsumer protection you have when buying a regulated mortgage. You then take your extra cash from the remortgage on this house and put it towards the deposit on your new one.

2. Let to Buy - you obtain consent to let from the existing mortgage lender on your property, and rent the property out. The differential between the mortgage payment and the rental income i.e. the profit, is then added to your income to boost if sufficiently to allow you to borrow what you need for your new purchase

It sounds like your broker has considered option 2 but written it off for some reason, it may well be justified and legitimate, or the broker may just want you to do two mortgages through him to line his own pockets

Either way I would suggest that you get in touch with another broker who has experience with let to buys and see if it really can be done.

MM

herbiesjp

There are plenty options on either a BTL or Let to Buy scenario with various lenders.

However, criteria can become restrictive depending on the exact circumstances.

If you are still unsure as to why one option is not available, go back and ask the adviser again - you can never ask too many questions, and there are no silly questions.

If still not convinced, then you can look for a second opinion, by going to an adviser and giving them the same identical information and seeing what they come up with

A fee free whole of market adviser would be a good starting point

HTH