Overpay or Second place?

amberjones

Hi everybody,

I am looking for some advice or for some questions to be thrown at me that I am not aware of myself. I live with my partner in a house we purchased for £160,000 with a 15% deposit a couple of years ago. We have made various over payments over the last two years to a point where we now owe £112,000.

We have recently remortgaged to a better deal and have come to a cross roads. Do we continue to overpay approx £1500 a month or would it now be a better investment to start saving for a second place?

I am due a bonus of approximately £5000 in a years time so potentially we could have a deposit of £23,000 saved. Is there anybody who has been in a similar predicament? If so what did you decide to do and why?

Thanks

Amber

Landofwood

What would you do with the second place?

amberjones

Sorry that's rather pertinent information I failed to mention. I have tried searching for more information on getting a second residential mortgage. I had hoped that by showing we can save/ overpay £1500 a month we could prove we could afford to pay two mortgages at the same time. Best case scenario would be a place my mum would live in for free whilst she saved herself. A few years down the line converting it to a buy to let.

Landofwood

Demonstrating that you can save/overpay x amount is irrelevant. The lender will plug your incomings and outgoings into their affordability criteria and you'll either pass or fail.

You should speak to a broker who will find you an appropriate lender given your circumstances.

As an aside, think carefully about becoming a landlord to family.

amberjones

Would a broker be interested at this stage? I am a minimum of 12 months away from being in a position to committing to a new place.

Is there anything else I should be considering? Is it worth just concentrating on paying the one mortgage off?

sam2015_2

1. In Lender's point of view can you afford two residential mortgages?
What we think we can afford and what lender's think aren't always the same thing. If you can, then I would say save the extra money for deposit towards the second property.

2. Find out from your current lender .......whether you can get consent to let your current property when you buy the second one and how long for. Can you let it to family? You won't be able to do equity release on this so save up the extra.

3. Overpay as much as you can now. Remortgage to 'let to buy' and get the equity from this to go towards the deposit for the second property.

Best to speak to mortgage broker.