Buying A Second Home

Toucan_toucan

Hi all,
I'm after a bit of advice please.
Me and my husband live in London in a 1-bed shared ownership flat (we own 25%). Both of our employers have said that they intend for staff to be largely home-based forever, even when we're "allowed" to go back to the office. While we've coped for the last year we can't live like we are forever and we desperately need more space.

However... We cannot sell our flat (either the 25% or staircase and sell in one go) because it needs significant fire safety work. This work hasn't even started yet.

We're in the fortunate position of being able to keep our current place and afford something cheap and cheerful outside London (for anyone wondering we bought our current place 8 years ago and have both seen our careers progress in that time - we absolutely needed shared ownership at the time). It is not our intention to rent either place out, we would live in both - London for the days we need to be in the office/doing London stuff and the other place the rest of the time (especially when they're doing the building work).

I guess my question is, is this possible? Can we have two "normal" mortgages? Will a mortgage lender be any more or less favourable given our current situation? I'm a bit worried they'd see our current flat as more of a liability than an asset. Are there any obvious pitfalls, other than obviously having the running costs of two properties to consider, plus the costs of travelling between the two places?

We can't see any other way out in the short term, other than renting - but given we can afford to buy that doesn't seem sensible (happy to be convinced otherwise though).

Sorry for the long post, any advice would be very much appreciated! 

moneysavinghero

If you can't sell your flat then it is effectively worth £0.00. Not sure why a bank would want to lend you a large sum of money secured on an asset worth nothing.

Not sure how the Shared Ownership works, but would you even be able to effectively sell it to yourself with a normal mortgage. Would you not need to fulfil the criteria to be in need of shared ownership. If you have the money to buy another house then maybe you wouldn't.

Grumpy_chap

OP - Have you spoken with a broker to establish affordability or are you basing expectations on your own assumptions / assessment of the market?
For second homes, higher deposits can often be required and there may be a doubt in a lender's mind about your true intention to have a country home plus a city pad.  Lenders seem to be a rather suspicious lot at times.

Caz3121

do you plan to leave the current mortgage as-is and take a new mortgage (with new deposit) for the second property?
your current place will be a liability....it costs you money every month

Toucan_toucan

Thanks for the replies. 

Our intention would be as Caz3121 says, we would not change our current mortgage and would be looking to take out a second mortgage with a second deposit.  We have over £25k saved up and would be looking to borrow about £200k (i.e. looking to spend £220k in total).  The commitment to our current property equates to about £700/month for our mortgage, rent, and service charge - our outstanding mortgage is about £30k from memory.  We earn enough on paper to cover this easily (household income of £95k).  I don't know if I'm being naive thinking this is how things work (it sounds like I might be!), hence the post.  We could use the deposit we've saved to pay off the current mortgage, but given the situation we don't think it's worth doing (i.e we still can't sell it and we still need more space).

We haven't spoken to a broker/our bank yet because we only got the news about my husband's job this week, so we're only kicking ideas around at the moment.  It may be that we end up having to rent an office space somewhere but if we could do something that doesn't just see our money disappear in to someone else's pocket we will!

With regard to the value of our current property, the housing association won't sell the rest of it to us at £0 (we've asked!), but also we can't get a mortgage on a bigger share without an EWS1 form (which we wouldn't get), though our current lender will let us renew at our current level of borrowing (i.e. when our fixed term ends we can get a new fixed deal rather than going on a variable rate).

The point about the second home issue is exactly the sort of thing we weren't sure about - we hope we could demonstrate that we wouldn't need/want to let either (we are looking for the second home in an area close to where we've got family, etc. and we've still clearly got work commitments in London).  Talking to a broker is next!

Thanks again for your help.

katie91_2

Yes, it is possible. We are in a similar situation, our flat has a clean EWS1 but various complexities are delaying the sale, so we bought our current house while still owning the flat. 

My advice would be speak to a broker - we used Habito who were very helpful (and free!). Different lenders have different criteria - we had a 20% deposit and were at the limit of the affordability criteria to purchase the house we wanted, we used Halifax who accepted a letter from our estate agent confirming the rental value of our flat which gave the lender confidence we could rent it if necessary.

Also worth checking the stamp duty on second homes; I’m not sure at what purchase value it applies but we had to pay 3% (which is refundable if we sell our flat within 3 years) despite the stamp duty cut.

Toucan_toucan

katie91_2 said:

Yes, it is possible. We are in a similar situation, our flat has a clean EWS1 but various complexities are delaying the sale, so we bought our current house while still owning the flat. 

My advice would be speak to a broker - we used Habito who were very helpful (and free!). Different lenders have different criteria - we had a 20% deposit and were at the limit of the affordability criteria to purchase the house we wanted, we used Halifax who accepted a letter from our estate agent confirming the rental value of our flat which gave the lender confidence we could rent it if necessary.

Also worth checking the stamp duty on second homes; I’m not sure at what purchase value it applies but we had to pay 3% (which is refundable if we sell our flat within 3 years) despite the stamp duty cut.

Really appreciate this, thank you! 

lincroft1710

Don't forget you will have 2 lots of Council Tax and possibly a standing charge on gas, electric and water supplies.