How to buy a second home?

funcomp40

I currently have a flexible mortgage with a credit balance....I have seen a property today out of the blue that I would love to buy.

So here is the deal I have no savings. I was thinking that if I withdraw the 15% deposit from my flexible mortgage and deposit cash elsewhere.

Then remortgage my then flexible mortgage for a buy to let would only be 25-30K. Rent out my current house.

Get a normal mortgage for the other 135k and use the extra left over rent to subsidise my new mortgage.

Is this plausable?

Ps I have no debts at all and have no credit card

silvercar

Need some figures. What is the current property worth? What is the new one worth?

You will need about a 25% deposit for the BTL, so could withdraw the rest.

Then you need enough for buying costs plus a 10-15% deposit on the new place.

How much mortgage you can get on the BTL will depend on the LTV and the potential rental.

May also be able to consider transferring (porting) the existing flexible mortgage to the new place.

funcomp40

my current house is worth about 135 ish not been valued since i bought it but that is what next door sold for last year.

new one is 160k

rental potential is about £450 - £550 locally

I have some cash savings for the costs about 10k

i am thinking i can get near to 100k for the btl mortage and put that down as a deposit on the new gaff.

I would be looking to transfer my current mortgage over to the new property. As I overpaid it and paid off my last mortgage in about 10 years

HappyMJ

funcomp40 wrote: »

my current house is worth about 135 ish not been valued since i bought it but that is what next door sold for last year.

new one is 160k

rental potential is about £450 - £550 locally

I have some cash savings for the costs about 10k

i am thinking i can get near to 100k for the btl mortage and put that down as a deposit on the new gaff.

I would be looking to transfer my current mortgage over to the new property. As I overpaid it and paid off my last mortgage in about 10 years

That's not a particularly good return. Average £500 a month on £135,000 is only 4.44%. You could borrow somewhere around £85,000 to £90,000 based on that rental figure.

funcomp40

my current house is worth about 135 ish not been valued since i bought it but that is what next door sold for last year.

new one is 160k

rental potential is about £450 - £550 locally

I have some cash savings for the costs about 10k

i am thinking i can get near to 100k for the btl mortage and put that down as a deposit on the new gaff.

I would be looking to transfer my current mortgage over to the new property. As I overpaid it and paid off my last mortgage in about 10 years

silvercar

On a rental of about £500pcm, lenders will look at about 96k on a BTL basis. £450 pcm and the amount drops to about £86k. (I'm assuming that lenders look for 125% of the mortgage covered at 5% interest.) So you do need the rental to come in.

funcomp40

yes well I was conservative on the rental min is probably 500 and i did llook online and there is a house round the corner on for 600 so I guess it would just pay off. As the new house is not that expesive the repayment would only be 400 a month I do have a good job and could afford to pay both mortgages if necessary my issue is that for tax reasons should i go for the btl or just buy the new house i have been offered a mortgage for the whole amount and just rent out my current house. This would however push me into 40% tax earnings.

funcomp40

the only other option is to sell my current house and get a full mortgage on the new one and use the left over money to get some lower cost higher return btl mortgages. I guess the houses on this estate sell within a couple of weeks and are always popular for rental, but perhaps i look to buying at the lower end of the market.

Problem is I defintely want to buy the new house for 160 I was not initially looking to make a ton of money it was just a way to finance both and have something extra at the end of it.

silvercar

Tax wise, it is the purpose of the loan that counts, not where it is secured. So if the purpose of the new borrowing is to run a BTL as well as your home (as opposed to sell it and buy your home) the interest can count as a rental expense irrespective of which property it is secured on.