Confused: Looking to buy a second property. Any expert advice?

karlwatson

Hello everyone,

Im new to this website and forums on the whole but have been following a few posts and it seems to be very helpful. I was looking for some expert advice on my situation.

I currently own a 2 bedroom flat which I purchased in 2011 for 275,000. The price of this property has gone up by £40,000 as per Zoopla since I first got it. I currently have an outstanding of about 190,000 on this property and the mortgage is via Natwest. Therefore, as per my understanding I have an equity of £125,000.

I am now interested to get a second home however I wish to keep my current flat and maybe rent it out. What are my options?

Firstly, am I correct is saying that I have £125,000 as equity from my first property and could I use this as a deposit on the second home? I was wondering if I could use this equity (in part or full) towards my second purchase. Is this possible? Any expert opinions?

Regards,
K

amnblog

What you suggest is possible.

The 'valuation' you have is unreliable.

Cornucopia

The equity in property 1 is not available as a deposit for property 2 unless you release it in some way.

First thing you need to decide is whether you will rent out property 1 or not. There are different rules for second homes, buy-to-let, consent-to-let and let-to-buy any of which could be in play, here.

The most straightfoward approach to what you appear to want to do is consent-to-let. This entails asking your current lender for permission to rent property 1. They will probably impose additional fees, though lenders vary as to what the fees are and how they are structured. My lender adds 0.25% to the outstanding mortgage account twice a year.

Once you have consent-to-let, many new lenders will consider you unencumbered and ready for a new mortgage on property 2 on their usual terms.

If you want to release funds from property 1, you'd need to remortgage instead, probably as BTL.

karlwatson

amnblog wrote: »

The 'valuation' you have is unreliable.

Could you kindly clarify?

Cornucopia

Whether what you want to do is possible/affordable will be down to LTVs, which ultimately depend on valuations.

If your valuation is out, then it could make the entire deal unviable.

Here are some basic figures...

Property 1 value: £315k
Remortgage to 75% LTV: £236k
Releasing funds of: £46k

Max Property 2 value to get to 85% LTV: £306k

GMS

How much rent would you expect the flat to generate per month?

karlwatson

GMS wrote: »

How much rent would you expect the flat to generate per month?

There are over 100 flats in this development and the average monthly rental for a flat of a similar spec is £1300 pcm