Self Employed looking to remortgage

enthusiasticsaver

Taking out two mortgages just as interest rates are rising when you are self employed seems somewhat risky to me. You will need a broker but due to recent tax changes on BTL and likelihood of credit becoming more expensive and harder to come by why do you want to take out such a large amount on mortgage?

For BTL you will need a large deposit - I think 20% is the norm. This means you will not have the equity from your current house to put towards your new house (or only 80% of it). The mortgage interest rate is also generally higher as they are more risky. What contingency plan do you have to pay the mortgage on that as well as your new house should you not find tenants easily or they don't pay on time?

monkeybrains

enthusiasticsaver wrote: »

Taking out two mortgages just as interest rates are rising when you are self employed seems somewhat risky to me. You will need a broker but due to recent tax changes on BTL and likelihood of credit becoming more expensive and harder to come by why do you want to take out such a large amount on mortgage?

For BTL you will need a large deposit - I think 20% is the norm. This means you will not have the equity from your current house to put towards your new house (or only 80% of it). The mortgage interest rate is also generally higher as they are more risky. What contingency plan do you have to pay the mortgage on that as well as your new house should you not find tenants easily or they don't pay on time?

It's just a hypothetical thought more than anything and I greatly appreciate your reply, thank you.

I'm after a detached house, rather than the terrace I am currently in but this house is in a nice spot where values are going up more than the standard rates due to it being near the town centre which is currently being regenerated. So I'd like to keep it if possible but no problem if it needs to be sold in order to move on.

monkeybrains

What about the option of paying this current house off, and then renting it out?

Would I then be able to get a new Mortgage for £200,000? As I would have the rent income, along with my work earnings? and could always sell the original home if needed.

enthusiasticsaver

I am now confused. Where would the money come from to pay off your existing £79000 mortgage?

You said you had £25k but then you have no deposit for your new home and to get the best mortgage deals you need as high a deposit as you can pull together. Your income limits you to £134k on the new house so with your £25k you are around £41k short for the new property without selling your existing one. Then you have to find fees and stamp duty and technically as your new property would be a second one that is double stamp duty although someone more knowledgeable than me may know a way round that.

You would also at the same time have to go through a buy to let application to transfer your existing mortgage and presumably raise the rest of the money for your new home so minimum £41k giving you a BTL mortgage of £120k which is more than 80% of the value even assuming they will just take rental value as income.

I am sorry but I think your plan sounds incredibly risky unless you can find a lot more money to put towards either paying off your existing mortgage or a bigger deposit towards the new home.

monkeybrains

enthusiasticsaver wrote: »

I am now confused. Where would the money come from to pay off your existing £79000 mortgage?

You said you had £25k but then you have no deposit for your new home and to get the best mortgage deals you need as high a deposit as you can pull together. Your income limits you to £134k on the new house so with your £25k you are around £41k short for the new property without selling your existing one. Then you have to find fees and stamp duty and technically as your new property would be a second one that is double stamp duty although someone more knowledgeable than me may know a way round that.

You would also at the same time have to go through a buy to let application to transfer your existing mortgage and presumably raise the rest of the money for your new home so minimum £41k giving you a BTL mortgage of £120k which is more than 80% of the value even assuming they will just take rental value as income.

I am sorry but I think your plan sounds incredibly risky unless you can find a lot more money to put towards either paying off your existing mortgage or a bigger deposit towards the new home.

Thank you again for your reply.

I fully understand now that this would be risky.

The house I am currently in with the £79,000 Mortgage owed, is worth £130,000 so I have £51,000 ownership of that, along with £25,000 I should be able to get together due to having excess stock, therefore I could pay part of the mortgage off with that, leaving £54,000 owed.

I was thinking if I could get this £54,000 paid off over the next 2-3 years, this would mean I would then be in full ownership, therefore renting this would go towards a second mortage for a new home worth £200,000.

Like you say though, there will be stamp duty and I would need a substantial deposit, so maybe it would be better to concentrate on getting as much money together as possible with a view to investing those funds, along the sale of this current house into a new home.