Borrowing against a second property.

a1234555

Me and my wife were thinking to extend our property; however, we are now thinking to buy a second property (with another mortgage) and either see if we can get a higher loan than what the second property is worth, or, to then borrow against it in order to fund our extension. We have about £35k for deposit for the new property (which we estimate will be around £200k). This second property would be a buy to let so the rent should cover at least most of the month payments on the new mortgage. We still have 20 years of mortgage left on our first home (the one we want to extend). Does anyone see this as a feasible manoeuvre or is it too unrealistic and should be we just go for the extension on our first home? 

Brie

So you have a mortgage on your home and want to get another mortgage for a BTL.  Would your income support both mortgages - not taking into account the possible rent you might get as there's no guarantee.

I can't see any bank giving you a mortgage of say 120% or whatever the value of the new property in order to reno the old property.  Maybe buy the BTL, wait a year and then extend the home mortgage as that might be possible.  

a1234555

Thanks, yes both of our incomes have grown since buying the first property (from around 65k to 100k) so we should be able to make full payments on the second mortgage (not just interest) without rental income (although I imagine getting tenants should be easy enough in the area we are thinking of). We wouldn't want to spend that deposit money if we can't then borrow against the second property to build the extension. 

GrumpyDil

As it is a BTL you are still going to need a deposit. Without checking I won't guess a number but there are brokers frequenting these boards who will confirm that.

That said the time of borrowing more than a properties value have long since gone so I certainly would not bank on that as a plan. 

Keep_pedalling

Why not just buy a bigger house, it would be a lot simpler?

a1234555

We love our current house, it's a lovely area too. An upgrade to a different house wouldn't seem to be worth the stamp duty and would not be much of an upgrade. Plus we are locking into our mortgage for another few years.

housebuyer143

If you are getting the second on a BTL mortgage it needs to cover all the mortgage from the rent and more. Borrowing is not based on your income, but purely on rent achievable, that's going to be your problem I think as you say the rent should just cover the mortgage. 
You really need a 20% deposit for a BTL and you can't borrow more than it's value, so that's a non starter in my opinion. You can't really borrow against it's value if you have such a low amount of equity in it.

Hoenir

The better solution might be to simply to concentrate on saving / repaying the existing mortgage until such time as the building works are affordable.