Buying a second home after paying off mortgage

ethranes

Hi, I've paid off my mortgage so have 210,000 equity in my property. I am looking to buy a new house to live in and rent out this flat. The new house I'd want to buy would be 500,000. I only have around 30,000 in savings and investments at the moment, so am looking at releaing some equity back to a bank to beef my deposit up to get another mortgage. Can anyone give advice on this. Is it possible to get perhaps 100,000 from the bank by giving them some equity and using that toward a deposit for a new place? And then does that make sense financially? As in, then I would have both a new mortgage and a loan to pay off, it's all new to me, so any help would be appreciated. Thanks!

pjcox2005

You should potentially be able to release money from your existing property as a deposit, so it would be a question of whether you're earnings can sustain borrowing of £500k.

You'll also be buying a second property if renting out so it's £30k SD plus all legal and moving costs so you'd probably need to borrow more than £500k .

In addition you'd then need to have your existing property on a buy to let mortgage presumably.

First glance it all looks quite tight, but you could be earning very good money so you'd need to discuss with a mortgage broker.

MWT

ethranes said:

Can anyone give advice on this. Is it possible to get perhaps 100,000 from the bank by giving them some equity and using that toward a deposit for a new place? And then does that make sense financially? As in, then I would have both a new mortgage and a loan to pay off, it's all new to me, so any help would be appreciated. Thanks!

Talk to a broker about a 'Let-to-buy' mortgage.

K_S

@ethranesThis is called a let-to-buy transaction involving two simultaneous mortgages (they will need to complete the same day or no more than a couple of days apart) - one residential purchase (for your new house) and one BTL remortgage (for your current house).

Though there are a few quirks and criteria to meet on both sides of the transaction, it's a fairly straightforward process with the right lenders as long as the numbers add up. I would definitely recommend considering the use of a good broker, see here for those recommended on the MSE guide

 https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Done properly, the background BTL property will be seen as self-sufficient and not impact on your affordability for the residential purchase. With a couple of lenders, they might even consider the future surplus rental income as additional income to boost affordability for the onward purchase.

ethranes

Thanks all, didn't know about these btl or ltb mortgages, so I've got plenty to look into!

kokolino23

You'll end up with 2 mortgages, one residential, the other one buy to let.
I think might have to pay a higher stamp duty for you second property as well. Your income must be high enough to cover the new mortgage, for BTL there are different requirements.