Mortgage advice...

paulo666

Hi All,

I currently have a mortgage on a property I bought about 5 years ago. I moved out to another place to rent with my gf and I now rent out my house to a tenant.

I intended to do this for security, so if the relationship didn't work etc I wouldn't have sacrificed my house. Also I don't have much of a pension so I thought I'd keep the house as an investment for the future. It currently costs me £100 a month, as the rent doesn't cover the mortgage cost. I don't see this as bad though, as £100 pm to keep my foot on the property ladder is pretty good.

My gf and I are now planning to buy and i wanted to know a few things...

1.How will owning another home affect my ability to get another mortgage? i assume this would prevent me from making use of the Help to Buy scheme?

2.Is there a way to get a cheap Buy To Let mortgage?

At the moment most BTL mortgages seem expensive and I'd be in a similar predicament (the rent not covering the mortgage). My current mortgage is with a building society that said it was ok to rent out my house.

Any help appreciated

dimbo61

How much equity is in the property ?
Have you got a deposit saved for the next property ?
Has the rental property gone up in value over the last 5 years ?
Many BTL mortgages are interest only

paulo666

dimbo61 wrote: »

How much equity is in the property ?
Have you got a deposit saved for the next property ?
Has the rental property gone up in value over the last 5 years ?
Many BTL mortgages are interest only

Unsure of the amount of equity at the moment as I don't have a recent valuation yet. I've paid off around 8% of the mortgaged part of the house and I put in a 10% deposit.

I have a deposit saved for the next house.

Yes the rental property has gone up (according to Zoopla the area has gone up 11% on average in the 5 years I've owned the place).

I'm by no means rich but I think I can afford to keep the other house as a rental and purchase another. I just worry that this will be a stumbling block when it comes to getting another mortgage...

GMS

What percentage deposit do you have for the purchase?

chances

We are looking at doing the same, typically what sort of deposit will we need for a second house purchase?

Zoology_Dragon

We have a rental property and are currently in the process of buying a house (to live in). We have a 15% deposit for the new place, however the rent on the rental property easily covers the mortgage (both interest and repayment).

paulo666

Between me and my GF we should have at least 10% for the new house. Just wondering how (having my rental property) affects the deposit we'll need... Especially as it costs me to rent it out currently.

Thrugelmir

Zoology_Dragon wrote: »

however the rent on the rental property easily covers the mortgage (both interest and repayment).

Only interest is tax deductible. Capital element is repaid from after tax income. So might not be as profitable as it would seem.

amnblog

Paulo, you should be aware that the fact that your currently property does not pay for itself is a problem.

This can be a deal breaker for the mortgage on the new property if you approach the wrong lender.

In this scenario you need to use an independent whole of market mortgage broker.

Zoology_Dragon

Thrugelmir wrote: »

Only interest is tax deductible. Capital element is repaid from after tax income. So might not be as profitable as it would seem.

I know, I meant that it's a capital repayment mortgage not interest only. And it is profitable, we did all the calculations when we first looked into letting the property.

paulo666

amnblog wrote: »

Paulo, you should be aware that the fact that your currently property does not pay for itself is a problem.

This can be a deal breaker for the mortgage on the new property if you approach the wrong lender.

In this scenario you need to use an independent whole of market mortgage broker.

Thanks for the advice. Looks like I will need to investigate further, is it possible to get a cheaper mortgage on my rented house?

At the moment it's a standard mortgage and I've notified the lender that the property is rented. I understand this isn't common so I don't know how common these are... Should I be arranging to meet a financial advisor?