Buying second house and keeping first as BTL

coffeeandbiscuits

We have seen a house nearby that is perfect for us, it is up for auction mid June.

We have previously tried to sell our house twice but each time it has fallen through. We would not have time to try and sell this house and buy the auction house, but I was wondering if it was feasible to make our current house a BTL and buy the auction house to live in?

We earn around 62k together (about 67k with overtime), owe 46k on our current house, have around 50k cash, around 180k equity in current house.

The auction house is up for 330k, but I understand things can go much higher.

Is it stupid even pondering this?

hazyjo

Remember many properties are put into auctions because they have problems - often hidden. Sounds like you need a mortgage for this one so please make sure you're aware of the risks of buying an auction property with a mortgage as it would be an awful lot of money to lose! I'd not risk it.

Will let someone else come back to you re the rest.

eddddy

• Do you need a mortgage to buy the new house?

• Is the auction a conventional (unconditional) auction, or a conditional auction (often called 'The Modern Method of Auction')?

If it's a conventional / unconditional auction, it's extremely difficult to buy with a mortgage. Realistically, you need to either be a cash buyer, or have arranged a loan before you bid. (And you might arrange a loan and then be out-bid.)


If it's a conditional auction / 'The Modern Method of Auction', you probably have time to arrange a mortgage. But you have to pay a non-refundable fee to the auctioneer at the outset on top of the purchase price - it might be as much as 5%. (For a £330k purchase that would be £16.5k). So you would need the deposit plus £16.5k in cash. And you are likely to lose the £16.5k, if the purchase falls through.

canaldumidi

Before bidding (at a convetional auction- if it's a 'modernmethod' auction, walk away), you must have already

* done  any survey you might need (unless you are confidant in your own abilities)

* got the cash arranged (including a firm mortgage offer- not a MIP)

* checked the legals with your solicitor (unless you are confidant in your own abilities)

All of the above could cost you money which would be lost if outbid.

Don't forget 2nd property additional 3% SDLT.

Asf for becoming a landlord, have you read the stickie?

Post 7: New landlords (1):advice & information :see links in next post

Post 8: New landlords (2): Essential links for further information

Post 9: Letting agents: how should a landlord select or sack?

K_S

@coffeeandbiscuitsLimited to the mortgage aspects of your scenario -

This is called a let-to-buy transaction involving two simultaneous mortgages - one residential purchase (for your new home) 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 usually (but not in this case) a fairly straightforward process with the right lenders as long as the numbers add up.

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.

In your case, if the onward purchase is a traditional auction, that introduces a significant amount of complication to a let-to-buy, primarily due to the very tight timelines involved and the costs at risk if you're unable to complete in time.

coffeeandbiscuits

hazyjo said:

Remember many properties are put into auctions because they have problems - often hidden. Sounds like you need a mortgage for this one so please make sure you're aware of the risks of buying an auction property with a mortgage as it would be an awful lot of money to lose! I'd not risk it.

Will let someone else come back to you re the rest.

Thank you for the reply. I am quite nervous about this - the estate agent said that two previous buyers had dropped out but because one had cold feet, the other had found a new house, and so the family decided to auction it (someone has sadly passed away). 

coffeeandbiscuits

eddddy said:

• Do you need a mortgage to buy the new house?

• Is the auction a conventional (unconditional) auction, or a conditional auction (often called 'The Modern Method of Auction')?

If it's a conventional / unconditional auction, it's extremely difficult to buy with a mortgage. Realistically, you need to either be a cash buyer, or have arranged a loan before you bid. (And you might arrange a loan and then be out-bid.)


If it's a conditional auction / 'The Modern Method of Auction', you probably have time to arrange a mortgage. But you have to pay a non-refundable fee to the auctioneer at the outset on top of the purchase price - it might be as much as 5%. (For a £330k purchase that would be £16.5k). So you would need the deposit plus £16.5k in cash. And you are likely to lose the £16.5k, if the purchase falls through.

Thank you for the reply. Yes we would need to take equity out of our current house and have a BTL mortgage on that, and then have a residential mortgage on the auction property. 

It's the modern method of auction yes 

user1977

coffeeandbiscuits said:

eddddy said:

• Do you need a mortgage to buy the new house?

• Is the auction a conventional (unconditional) auction, or a conditional auction (often called 'The Modern Method of Auction')?

If it's a conventional / unconditional auction, it's extremely difficult to buy with a mortgage. Realistically, you need to either be a cash buyer, or have arranged a loan before you bid. (And you might arrange a loan and then be out-bid.)

If it's a conditional auction / 'The Modern Method of Auction', you probably have time to arrange a mortgage. But you have to pay a non-refundable fee to the auctioneer at the outset on top of the purchase price - it might be as much as 5%. (For a £330k purchase that would be £16.5k). So you would need the deposit plus £16.5k in cash. And you are likely to lose the £16.5k, if the purchase falls through.

It's the modern method of auction yes 

Run away!

hazyjo

user1977 said:

coffeeandbiscuits said:

eddddy said:

• Do you need a mortgage to buy the new house?

• Is the auction a conventional (unconditional) auction, or a conditional auction (often called 'The Modern Method of Auction')?

If it's a conventional / unconditional auction, it's extremely difficult to buy with a mortgage. Realistically, you need to either be a cash buyer, or have arranged a loan before you bid. (And you might arrange a loan and then be out-bid.)

If it's a conditional auction / 'The Modern Method of Auction', you probably have time to arrange a mortgage. But you have to pay a non-refundable fee to the auctioneer at the outset on top of the purchase price - it might be as much as 5%. (For a £330k purchase that would be £16.5k). So you would need the deposit plus £16.5k in cash. And you are likely to lose the £16.5k, if the purchase falls through.

It's the modern method of auction yes 

Run away!

Agree. Do lots of research!

Slithery

coffeeandbiscuits said:

It's the modern method of auction yes 

Then forget about this property and look for something else instead.