Will buying a second home affect how much I can lend?

Troy_af

Hello.

I am having thoughts of buying a second home. This is not intended to be long term. The plan is to purchase a new home without having to sell my current home in order to be essentially chain free and make the process a lot easier, then when I’ve completed put my original home back on the market. I’ve having quite bad luck so far with a purchase falling through, then a new offer accepted, then my buyer now potentially pulling out which is why I am now considering this option. I’ve never considered it before and it may be totally stupid for whatever reason, so any advice appreciated.

So my first question is, will doing this mean that lenders will offer me a much smaller mortgage and my original budget will probably have to be lowered? I would imagine so, but would the lender not be taking into consideration the fact that my existing home is on the market and I fully intending on selling, therefore the paying of two mortgages is only intended to be short term (until I find a buyer basically).

Secondly, will I need a bigger than normal deposit? If I do go ahead with this then my deposit will obviously not be coming from equity in my current home, instead it will come from personal savings and I will be looking at an approx max deposit of around 13%. The plan would then be to overpay on the mortgage once I sell my previous home using the equity from that.

I am aware of extra stamp duty which I can then be refunded if I do sell. I am also concerned about potential capital gains tax that I need to do further research on, but I will post in the tax section for that to not confuse things. Are there any other things I should be worried about here? It looks to be a plan that should in theory work..

Thanks for any input.

 

movilogo

Yes, if you have already another mortgage (which is not buy to let) your affordability will be affected for another mortgage.

Assuming you meant "borrowing" instead of "lending"

The_Fat_Controller

Do you really mean how much you can BORROW ?

canaldumidi

The_Fat_Controller said:

Do you really mean how much you can BORROW ?

I was confused by that too.

K_S

@troy_af Depending on your income and the size of the background mortgage, it may indeed lower your onward max borrowing. Generally speaking, the lender will judge it based on whether or not you will be owning the background property at completion.

Try playing around with a couple of lender affordability calcs to see what impact (if any) it has. Make sure you put in costs such as council tax+utilities as well.
https://nationwide-intermediary.co.uk/calculators/affordability-calculator
https://online.accordmortgages.com/public/mortgages/quick_enquiry.do

Whether your onward purchase will be subject to an LTV cap or not will depend on the specific lender.