Buying a second home & remortgaging current residence

blueruby_2

Our home is on a mortgage with HSBC and the fixed rate ends in December 2017. About August/ September we would be moving to another city because of DH work. We would initially rent for a while in the new place & eventually buy a home there. I understand that we can request for a Consent to Let valid for 12mths from HSBC for our current home & rent it out when we move to the new city.

1) In December when the fixed rate ends should we look for a buy to let mortgage or a residential mortgage for the property?
2) To buy another home in the new city, would it possible to get funds from our current property when remortgaging? The reason being we don't have a lot of money saved up for a huge deposit.
Our initial deposit for the current home was 40% of its sale price. Including the payments made over the past 5 yrs we would have paid in at least 50% of the mortgage.
3) We have some money in the bank & plan to upgrade the bathroom in our home & put in a new shower room if possible before September. Would it be better to get a loan on the house for the home improvements & keep the funds in our bank a/c towards the deposit for a new home?
4) If we take out a loan for home improvement with HSBC, will the interest rate be the same as our current mortgage? What happens when we go to remortgage the house + loan in December?

Would be grateful if someone can clear our doubts please. Thanks.

Thrugelmir

A few thoughts.

Why do you want to become LL's? Is the potential return good enough to warrant the risk.

What do you hope to achieve by spending money on the existing property?

Do you understand fully the tax implications of a BTL mortgage?

If you live in a different City who is going to manage the property?

Buying a second property will incur you second home stamp duty.

blueruby_2

Thrugelmir wrote: »

A few thoughts.

Why do you want to become LL's? Is the potential return good enough to warrant the risk.
The property is in a good area and we would like to keep it as an investment.

What do you hope to achieve by spending money on the existing property?
The bathroom needs upgrading if we want to rent / sell so that has to be done.
We hope that adding a shower room will help increase the value of the house & make it more attractive to renters/ buyers.

Do you understand fully the tax implications of a BTL mortgage?
Not really. Have to look into it.

If you live in a different City who is going to manage the property?
We are moving about 50 miles from the current property. Initially we hope to let the agent manage the property. Have to look into it properly.

Buying a second property will incur you second home stamp duty.
Yes, unfortunately.

Thanks for taking the time to reply.

Trickzyy

blueruby wrote: »

1) In December when the fixed rate ends should we look for a buy to let mortgage or a residential mortgage for the property? You can continue the consent to let at whatever the lender's rate is, or remortgage to a new lender, but this will have to be a BTL mortgage as the property is let.

2) To buy another home in the new city, would it possible to get funds from our current property when remortgaging? The reason being we don't have a lot of money saved up for a huge deposit.
Our initial deposit for the current home was 40% of its sale price. Including the payments made over the past 5 yrs we would have paid in at least 50% of the mortgage. Yes, you can do this. The amount you can remortgage by will depend on the rent you receive, and the LTV can not be over 75%. I.e. your property is worth £100k and you receive a rental income of £500 monthly. Based on a stress test of 145% @ 5.5%, you could borrow just over £75k, which also fits the 75% LTV rule almost perfectly. You could then use the £25k equity as a deposit for your new home.


3) We have some money in the bank & plan to upgrade the bathroom in our home & put in a new shower room if possible before September. Would it be better to get a loan on the house for the home improvements & keep the funds in our bank a/c towards the deposit for a new home? This is completely your decision. If you can receive a decent rental income with the bathroom & shower room as it is, is there really much point? If it will add significant value to your home when it comes to selling, then it might be worth it.


4) If we take out a loan for home improvement with HSBC, will the interest rate be the same as our current mortgage? What happens when we go to remortgage the house + loan in December? All debt will be taken into consideration when applying for a mortgage and this will have an impact on how much you can borrow. The loan would not necessarily have the same interest rate as a mortgage as they are totally separate products.

Would be grateful if someone can clear our doubts please. Thanks.

You will also be liable for an additional 3% SDLT on the second home, so be sure to factor this into your figures.

Hope this helps!