mortgage on bought home

stavrossthegreek192

Hello fellow money savers.

I have been very fortunate to have gained ownership of the family home. I'm looking at buying a flat and would be interested in mortgage thought.

The house I own is mortgage free and worth approx 450k. Is it a good idea taking out a mortgage against my main house. I'm looking at a flat where I expect 160k will buy it.

I've a good salary with low outgoings.

HouseBuyer77

Seems like a good idea. The better LTV will give you far more favourable rates. You can also become a cash buyer giving you an edge over others. Though to do this you'll need to get the mortgage before you offer.

I guess one downside is the mortgage will be secured against your main home. Should you no longer be able to afford the repayments that is the one that would be repossesed.

kingstreet

So where do you plan to live and what's going to happen to the other property?

stavrossthegreek192

I'll probably live between house and flat: the flat would be in Edinburgh and the house is in a small village.
Would having a deposit of sorts along with mortgage on current home make much of a difference?

For example if I had around 10% of the flat value as a conventional deposit and mortgage against my house?

kingstreet

No, not really.

Many lenders will allow you to raise money on your main residence to purchase a second home. Expect to have the costs of the other property factored in to affordability.

HouseBuyer77

The major factor is LTV, loan to value. The more money you have to borrow against your home the worse the rate will be. So if it's a case of borrow £160k or borrow £150k and spend your own £10k then you'll have an LTV difference (though a sufficiently minor one that it probably won't do much for you). If it's a case of borrow £160k either way but potentially use another £10k to spend more on the flat it won't effect the mortgage.

Be aware you'll be charged 3% extra stamp duty. Also beware of potential extra council tax costs for second homes (as Kingstreet says this kind of thing will get factored into your affordability). Home insurance also asks that your home is occupied but if you're using it on a regular basis that shouldn't be a problem (though do check your chosen policy very carefully to make sure).