how to buy second property?

jamels2

hi, looking for some advice on mortgages!

i already have one from woolwich, a residential mortgage on a maisonette i currently live in. i want to rent this out and buy another small property to live in.

i have a consent to let form which i can send off to be able to let this place out for a £25 fee. i am able to borrow an extra £12.5k on this mortgage and add that to another £1.5k in the bank that makes £14k which i have for a deposit.

I have looked at mortgage products and there is a 90% mortgage available so in theory i can buy a second flat up to £140k. To get the extra £12.5k I just have to write a cheque. So it should just be a case of writing the cheque to myself and applying for a new mortgage, once mine goes on consent to let.

If I want to borrow more the bank said I have to make an appointment to go through everything, previous p60s, payslips, do a full budget etc. Also get the property valued again. Also they said I must do that before the consent to let. Apparently once I have done consent to let they freeze the mortgage terms and I can't borrow any more on it.

So is the first option the way to go? I am thinking of trying this out for the 2 years I should get under the consent to let. After that I would change the first mortgage to a buy to let, or if It wasn't working for me I would just sell the property.

Thank for any replies....... hope it all makes sense and I have a chance of doing this.

Thrugelmir

jamels2 wrote: »

or if It wasn't working for me I would just sell the property.

Crunch the numbers properly. Letting property is a business with all the rewards and risks that go with it. Void periods, non paying tenants, increase in interest rates all factors that need thinking through. Selling an empty property will cost money too. So make sure you have the financial reserves to carry you through any bad times.

holly_hobby

Be careful, many lenders restrict LTV on a 2nd property, even where the 1st is fully self sufficient (ie rent is covering mge with a surplus), where you will be looking at a min of 15% deposit.

You then need to source a lender whom will set aside the woolwich mge, when assessing affordability for your new mge on your new primary residence .... however a decent broker would make short work of this aspect of the enquiry.

With regards to the mechanics of letting, you need to firstly look at demand in your area for the type of property, and tenant you want to attract.

You then should have an emergency fund, and a plan on how you will continue to service the mge when you have no tenants, or tenants that simply aren't paying.

As a first time landlord, I would strongly suggest discussing this and more with a local letting agt, whom will guide and advise on how viable, and profitable this exercise would be (ie your net yield after deduction of prof/management and servicing fees, blds insurance, emergency repairs, etc, etc, etc the list goes on ..) - to which if you are on a repayment mortgage (and woolwich won't switch to IO), you will have to absorb the capital repayment element, as only mortgage interest is a permitted deduction for HMRC purposes..

You also need to check how long woolwich will give CTL - as an accidental landlord its usually 3 yrs, at which point they will make you switch onto a BTL mge with them or remortgage elsewhere if they don't offer BTL finance ... and then if you have a LTV in excess of 75%, you may struggle to secure alternative funding .... so you can see some future contingency planning (if you wish to retain the let longterm) may be reqd here.

Tread carefully .... do your homework ... ask for advice and the guidance of local agts and professionals.

Hope this helps

Holly x

iainscomputer

As your mortgage is with Woolwich, for borrowing the deposit, do you intend to use the Woolwich overdraft facility available to mortgage holders?
Because I read that The Woolwich had stopped offering this service as it was underused.

jamels2

funny you should say that, i asked why the overdraft limit on the current account stopped increasing several months ago. i was told it is because they are now a responsible lender and some people were getting into trouble by borrowing money on this overdraft and still having money owed even when their mortgage term ended.

just my luck really, if it had kept increasing, i may have enough available from there via writing a cheque to myself, instead of having to apply for more funds and apply for a new product which will probably include more fees.

jamels2

just re -reading the replies. maybe i should leave all this for the time being. would you say that a buy to let property is something you might do once you are a bit older and settled yourself, possibly a pension alternative? at the moment i havent even got my own place sorted out, i am lodging. should i get comfortable myself, buy my own place, before even considering buy to let?