Looking at a second property... the chances??

jimnastics

I've been casually reading this forum for a while now, great source of information :T Now it's my turn to ask for help!

My OH and I are tentativelly looking at purchasing a second property to either buy-to-let as an investment or renovate and sell. I appreciate the doubt surrounding the property market at the moment and we are prepared to wait, however down here in some parts of the south east things seem to be staying afloat... touch wood.

We are 24 and 25 and our joint income is £70k, and we own a 2 bed flat which we bought for £148,500 (15 months ago), which includes a £23k deposit. We've recently had the flat valued at £170,000.

Before we go and speak to finance / mortgage advisors, I would just like your general thoughts on what our chances are of being offered a mortgage to buy, say, another flat in the £140k region? Is the decision of a) buy-to-let or b) renovate and sell going to be a make-or-breaker in the lenders eyes, and if so how? If you think buying a second property is daft, what is the maximum mortgage do you think we would be offered to move into a new home? Any other advice before we start making our moves??

Any help would be really appreciated.
Cheers,
JimNastics

Doozergirl

Where's the money coming from for the second house?

jimnastics

Well this is the bit where we need the most advice, hence why we're arranging to see a financial advisor, so bear with me! The money will need to come from a lender so I imagine another mortgage? The mortgage on our flat needs renewing in May, so it could be a chance for us to free up some money (considering it's increase in value) and use that to help finance the purchase? Financially we could fairly comfortably cope with another mortgage of similar value to our current one, so it's more an issue of securing one in the first place.

jimnastics

jimnastics wrote: »

Well this is the bit where we need the most advice, hence why we're arranging to see a financial advisor, so bear with me! The money will need to come from a lender so I imagine another mortgage? The mortgage on our flat needs renewing in May, so it could be a chance for us to free up some money (considering it's increase in value) and use that to help finance the purchase? Financially we could fairly comfortably cope with another mortgage of similar value to our current one, so it's more an issue of securing one in the first place.

Just to add to that, I don't know how the two choices would effect our chances of securing a mortgage:

Buy-to-let: In the area we are looking at, 2 bed flats are rented at about £600 - £650 per month. Depending on how much the flat costs to buy, I'm thinking this would be more than our mortgage payments.

Renovate and sell: I'm really unsure on this bit! Is it as simple as you just pay the mortgage for however long you renovate, then when you sell pay the mortgage off completely?

Doozergirl

It's impossible to renovate and sell in any timely fashion with normal jobs and equally impossible to make any money unless you know the right people or have experience.

Buy to Let, you need a yield of 8 or 9% at least for it to even be worth it. You'll find an area can either provide that, if you get a bargain, or it simply will not, even if you got the property at a silly price.

It just isn't the time for this sort of thing. Why not concentrate on overpaying your mortgage and then when things settle down a bit, consider it then? You'll have more equity.

fc123

Old school here...if you have cash in the bank...you can research any possible gains and losses.
Equity is NOT cash under the bed in a suitcase...it is something perceived, not actual....you can't feel it.

Sorry OP, but feeling maverick tonight.
My tip would be do nothing right now...credit cruch and effects of are sinking in now...wait and see if the jobs are secure etc etc.

mystic_trev

I wouldn't do it in your situation, and you probably can't anyway. Max LTV for a BTL will be 85% Doubt if you would even get 75%

mystic_trev

jimnastics wrote: »

The mortgage on our flat needs renewing in May, so it could be a chance for us to free up some money (considering it's increase in value) and use that to help finance the purchase?

May have worked this time last year, but not now. If you try to withdraw equity when remortgaging you'll need a greater LTV on your mortgage. Greater LTV = Higher Interest rate on your mortgage. You're already to highly geared to make this work.

Zammo

Doozergirl wrote: »

It just isn't the time for this sort of thing. Why not concentrate on overpaying your mortgage and then when things settle down a bit, consider it then? You'll have more equity.

LOL, you've changed your tune. I was under the impression you were firmly in the "house prices only ever go up" camp.

:rotfl:

ixwood

Normal sensible people assess the facts at the time. The "Bears" were wrong for 6 or 7 years. Just because the situation is different now, doesn't mean they weren't wrong all that time.

And likewise, just beacuse you used to think property was a good bet, doesn't mean you're stuck with that view forever.

That would just be silly.

Doozergirl

Zammo wrote: »

LOL, you've changed your tune. I was under the impression you were firmly in the "house prices only ever go up" camp.

:rotfl:

Find one quote. I dare you.