Thinking out loud...two residential mortgage?

kaych

Is it possible for us to get a second mortgage?

We still have around 130k to pay on our existing mortgage, we estimate the value of our flat at around 200k.

We are now looking to potentially buy another place (ideally a house) closer to work as it currently takes my partner 3 hours a day to travel to and back from work.

We don't really want to sell our existing place, we want to keep it and may or may not rent it out (probably unlikely as we are not landlords and prefer not to be one...)

We pay around £650 a month on our mortgage plus around £150 service charge + ground rent. Our household income is around 63k and have around 30k saved + 5k for fees etc.

Based on the information above, can anyone give us an indication of how much we can potentially borrow for a new house? and is it possible to have two residential mortgages?

Any comments and advice is much appreciated. Thanks.

amnblog

You can do this in theory. If you are renting out the current property you can borrow more but if living across both you may raise just into six figures on the new mortgage.

kaych

Just six figures may not be enough for us to get a house in an area we want. Looks like it may be a no-go then. Thanks for your reply anyway. Looks like may have to continue to save

kingstreet

Lenders have different ways of "taxing" you for the existing mortgage.

Some deduct the capital value from your borrowing power, limiting what you can borrow. In that case, a lender offering 5x joint income would go up to £315,000, less the existing £130,000 leaves a new mortgage on top of upto £185,000.

With your deposit, that would mean a purchase price of £215,000. Be careful though, as some lenders have a lower maximum loan to value for second properties. Nationwide's is 85% for example and my calculation above results in an 86% advance.

In other cases, lenders treat the existing mortgage payment like a credit commitment and take the monthly cost away from your income before multiplying. In this case, a 5x joint income lender would lend upto £283k, a much better amount than in the first example.

You need to remember, other costs such as other credit, dependents, childcare etc will all be deducted on top of the mortgage cost, so you need to ensure you fully investigate the options with a good independent or whole market broker before you embark on viewings and definitely before you start spending money on fees.

I assumed your incomes are roughly equal and that you have a joint existing mortgage.

kaych

Thanks kingstreet for the detailed response.

To answer some of your questions, yes, we have a joint mortgage and a similar income (my partner earns about 4k more than me).
We don't have any debts or dependents.
Do you think it is worth us going to the bank for some numbers or should go for a broker and work out the different scenarios?
Scenario 1: Rent out existing apartment and buy second place
Scenario 2: Sell existing apartment and buy another place
Scenario 3: Keep existing and new place as residential
Thanks!

kingstreet

Broker, definitely.

A single lender will give you only information on its own products, services and criteria. You may come away thinking you have only limited options.