Mortgage/ Buy to let, would this be possible?

dawnebabe

I have a residential mortgage with husband currently. A house has come on market yesterday that I would like to buy. It's £55k, but needs refurbishing, once that has been done, which I think would be around £10k, it would be worth around £90-100k, looking at similar properties in the street. My plan would be to rent out our current house, which could rent for £550 per month, the mortgage is currently £410. We would then live in the other.

I've just checked my credit score, which shows as average, husband is in a debt management plan though. We are both employed. I have a pension that I could freeze which I pay around £210 per month into that I could use towards the 2nd mortgage.

Would it be realistic for me to apply for a 2nd mortgage alone, I earn £27k, as I figure that with husband being in the DMP there would be no chance of us applying jointly, though he earns £35k? I also have no clue about what we would need to do with the current mortgage if we were then not living in that house!

I have all sorts of plans & theories whirling around in my brain, but part of me is telling me that this could never happen! Is this possible? Hope that this makes sense (it does in my head!)

Thanks in advance for any help!

ACG

Im not sure where to begin with this. I would be very surprised if you can get this on a BTL but I will let you know the difficulties and you may be able to overcome them...

Purchase price under £75k will knock out a lot of lenders.
The condition of the property, is it habitable?

Are you financially associated to your husband? (this will be on your credit reports)
Is the deposit coming from you both?

Do you have a 25% deposit?

If you cant overcome those then you may be able to do a bridging loan, but they are not cheap.

I think you need to just sit down with a broker as I think there are too many issues to overcome with this, but a broker can go through it all with you with everything infront of them. I would have too many questions to type out on here.

dawnebabe

Thank you ACG for responding.

The house is habitable, just needs new kitchen, bathroom, gardens are a mess, none of which worries me.

I have a joint account & current mortgage is joint also with husband, I assume he will be financially associated, though Equifax doesn't show him as being. Not sure about Experian as I need to wait for pin number before I can view the full report.

I don't have 25% deposit, but there is more than that in equity in current house.

I will contact a broker to discuss further, I desperately want to buy this house, it belonged to my grandparents over 20 years ago & has been ruined ever since by the latest owners. I would love to be able to restore it to a wonderful family home that it once was. Only other problem is I have a cousin who also wants to buy it & he's in a better position financially than we are The house went on the market yesterday & I bet he's at the estate agents tomorrow morning!

ACG

I really cant see this happening then.

Trying to secure a mortgage against the current property would need to be in joint names - that isnt going to happen whilst there is a DMP in pace.... to be blunt (in the eyes of a lender), if you can secure money against your house then you should be doing it to clear the DMP not to do further borrowing/spending.

dawnebabe

Ah..... Thank you. This was pretty much what I initially thought, but then tried to convince myself that there may be a way around it.

If I did have a 25% deposit, or husbands DMP could be cleared quickly, do you think that there would be any chance of this happening?

ACG

I think if YOU (as in you, and not both of you) can get 25% deposit then you could potentially buy it in your name alone.

You might also be able to get a brdiging loan to allow you to purchase it with a charge over the property and a second charge over the residential. It can then be converted to a BTL once the work has been done and value increased or paid off with the sale of the property... just be aware that when you buy a property you will struggle to sell it within 6 months. A lot of lenders have a 6 month rule.

dawnebabe

Thank you again, ok, so I need to sort out doing this on my own!

I don't want to sell the property, we would live in it forever. It has too much sentimental value for me to buy it to sell on, even though there is profit to be had in it! Our current property would become the BTL, which has 13 years mortgage left on it. I would happily then sell that property to pay off the mortgage on the other house.

I have been reading like crazy about BTL's since 4am this morning, so finally think I understand them, now I guess I need to read about bridging loans!! The only property I've bought is the one we live in currently, so I'm sorry I'm so clueless!

Am I right in thinking that the only other option would be sell the house we have now & buy the other? I hadn't intended moving until I saw the for sale sign go up yesterday. Would this be an easier option, provided we could sell our house?

Thank you again for your help!

dimbo61

If you buy for £55K and spend about £10K on a refurb it MIGHT be worth £65/75K.
The problem will be when you want to sell and the surveyor values the property.
He/she can only go on recent sales and if your property was the last one sold !
Not going to add £30K to the value.
You and your OH are all ready in a DMP.
Buying and selling costs money and owning a BTL involves spending money to bring what you have already stated is a run down property up to standard.

dawnebabe

Dream home plan is over, my cousin is off to estate agents this morning, the house backs on to his mothers. He's got the money to buy it so I can't 'fight him for it' as he told me. Gutted, but things happen for a reason. It wasn't meant to be. We will stick to our original plan, pay off husbands DMP, then move from current house. Thanks for all replies!

ACG

Get the DMP cleared as soon as possible. Do not treat it as an interest free loan. The sooner it is cleared, the sooner your credit report will start improving.

You could probably have done this, but it would have cost you an arm and a leg and on that sort of purchase price the profit made (although appreciate you may not have wanted to sell) would have been negligible. Also, purchasing a property for profit should be done with the head not the heart.

Thrugelmir

ACG wrote: »

Get the DMP cleared as soon as possible. Do not treat it as an interest free loan. The sooner it is cleared, the sooner your credit report will start improving.

An error of judgement far too many people make.