Using secured loans as a deposit for a second property.

r0zzyl0u

Hey MSEs,

New to the forums, so hello

"I'm just looking for some advice, I was thinking of selling my flat to release the equity to buy a house.However just been thinking that I could take out a secured loan on my flat and use this as a deposit for a house and rent my current flat.Just wasnt sure if financing the deposit for another house purchase using a secured loan would be looked at adversely on a secondary mortgage application?The rent I could get on my flat would comfortably cover the loan repayment + my current mortgage.Thanks"

I found this post from 2012 that mirrors my situation pretty perfectly so I'm just asking for some upto date advice really, please. I do currently let my flat with a BTL mortgage and am living with parents after a recent split. I had decided to save a 5% deposit until I found this Dream property I just Need!! Which got me thinking about secured loans.....

I'm having the flat valued this week so hoping for some posite equity!!

Your advice is massively appreciated.

Thanking you in advance,

Ros

anselld

Not likely.
The best you could do is extend your BTL to release as much capital as possible from the flat, probably 75%.
Sounds like your best bet would be to sell.

r0zzyl0u

Thank you I do appreciate your help here but I'm concerned if I sell up, then my income would be halved and I wouldn't be able to borrow what I have now (bought the flat with my sister originally but she's off the mortgage now) oh, what to do :S

Can anyone think of any legal loop holes? I'm racking my brains! Don't want to rob another bank!

anselld

You definately can't afford it then. The affordability rules have tightened since you bought the flat.

Pixie5740

If you can't afford the mortgage on the dream property without the rental income then you probably can't afford it. What would happen if the tenants fell into arrears or you have a void period or the rental property needed urgent repairs?

You could speak to a mortgage broker about the prospect of remortgaging the BTL property to release some equity and using it as a deposit on a new residential property. A 5% deposit will limit the range of mortgages available to you and won't attract the best rates. I don't fancy your chances but then again I don't know the full picture of your financial position and I'm not a mortgage broker

r0zzyl0u

Its so true, think I'm just taken by the views Even considering asking one of the tenants if he wants shared ownership, say a 33% share (I've known him a lonnnng time and trust him 100%). Maybe that way the banks would be more inclined.

I don't know. How Do people build portfolios of properties these days?!

marliepanda

r0zzyl0u wrote: »

Its so true, think I'm just taken by the views Even considering asking one of the tenants if he wants shared ownership, say a 33% share (I've known him a lonnnng time and trust him 100%). Maybe that way the banks would be more inclined.

I don't know. How Do people build portfolios of properties these days?!

They save up money and have equity in their properties, when the prices rise in property they get more.

They also have salaries that allow them to but properties which you do not seem to have on your own.

They don't build them up with loans.

r0zzyl0u

Looks like it's back to the drawing board then!

r0zzyl0u

It's 5 times your earnings if you're single and 4 times if you buy with someone else I heard. To be honest, I think it's a fluke I have this property!! =/

Pixie5740

I've seen a few dream properties whilst I've been saving my deposit and was a bit gutted I couldn't afford them at that time. Something else always turns up. Keep saving and keep your chin up.

r0zzyl0u

Aah, thank you so much, I'm sure it'll come right in the end
Continue to save and count my blessings, many would kill to be in my boat, I know that!!

Thank you all too