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Let to Buy Mortgages - Quite Complicated, Any Thoughts
8184mand
Posts: 28 Forumite
Here is my scenario:
Property 1 - bought 2 years ago, £75k approx value, outstanding mortgage £43k, monthly payments £349 per month, 12 years remain of mortgage (with Halifax currently, just finished Y2 of a 3 year fixed rate deal). This is only in my name.
Property 2 - ideally looking at purchasing a second home with partner for around £190k, currently no deposit, however partner being gifted £10k. Aiming for 15% deposit I think?
First thought was obviously sell Property 1 to raise majority of deposit and £10k gift would add to that to hopefully give enough. Should be reasonably straightforward I imagine - though would have to pay early repayment charge not sure how much this works out to.
However I'm wondering if it might be an idea to keep Property 1, release some equity from that in order to provide a partial deposit for Property 2, and then rent out Property 1. I think I could get advance of approximately £20k which spread over the remaining 12 years mortgage on Property 1 is about £130 extra (so £480ish).
This is all really quite Pie in the sky at the monent but does anyone have any thoughts about options?
Would Halifax allow to borrow more on a mortgage and then rent out? Does rental income have to cover the mortgage payments fully?
Would an alternative be to remortgage Property1 with someone else completely?
Is there anything else I need to think about? I think this might be something I need to refer to a broker but just wondered everyone's experiences?
Property 1 - bought 2 years ago, £75k approx value, outstanding mortgage £43k, monthly payments £349 per month, 12 years remain of mortgage (with Halifax currently, just finished Y2 of a 3 year fixed rate deal). This is only in my name.
Property 2 - ideally looking at purchasing a second home with partner for around £190k, currently no deposit, however partner being gifted £10k. Aiming for 15% deposit I think?
First thought was obviously sell Property 1 to raise majority of deposit and £10k gift would add to that to hopefully give enough. Should be reasonably straightforward I imagine - though would have to pay early repayment charge not sure how much this works out to.
However I'm wondering if it might be an idea to keep Property 1, release some equity from that in order to provide a partial deposit for Property 2, and then rent out Property 1. I think I could get advance of approximately £20k which spread over the remaining 12 years mortgage on Property 1 is about £130 extra (so £480ish).
This is all really quite Pie in the sky at the monent but does anyone have any thoughts about options?
Would Halifax allow to borrow more on a mortgage and then rent out? Does rental income have to cover the mortgage payments fully?
Would an alternative be to remortgage Property1 with someone else completely?
Is there anything else I need to think about? I think this might be something I need to refer to a broker but just wondered everyone's experiences?
0
Comments
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get a broker to discuss your options, it is something we are in the processs of doing to buy our dream house, so you would need a Buy to let mortgage and also be liable to pay additional stamp duty so you will need to work out how much "Cash" you will need for 2 mortgage valuations conveyancing and stamp duty but could be worth it
You may also need a rental value estimate on property 1
SLM0 -
Thanks for your advice. Just having a look and it looks as if the max LTV for a second home mortgage seems to be around 75% not sure if that's correct but if so probably rules that out as an option for us. Good luck with your dream house!0
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Or maybe it doesn't count as a second home if it's being rented?0
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You can rent out the first property by converting it to a BTL, Halifax will not do BTLs. Generally speaking you can go to 75% although there are some lenders who will go to 80%.
You may need to pay higher rate stamp duty on the new property (although it is worth double checking this with a solicitor as the answer seems to vary from solicitor to solicitor).
I think releasing £20k is a little ambitious though.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Thanks ACG, it's most likely going to end up just a pipe dream by the sounds of it. Was just an idea.0
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You and your partner will end up paying 3% additional stamp duty under this scenario, 5700 on a 190k purchase, add in the additional fees associated with BTL mortgages and I think (even without seeing all the figures) that you'd struggle to turn a profit here.0
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