Buy to let mortgage or second residential mortgage dilemma

(20 Posts)
Mortgagedilemma Mon 17-Oct-16 14:46:49

We've seen a house we would like to buy. There's no way we can get our house sold in time so are considering either getting a buy to let mortgage on it or a second residential mortgage until our house is sold.

We've just put our on the market and have had 13 viewers in two days so I'm not worried about it taking years to sell or anything.

I'm leaning towards second residential as once our original house is sold we could just pay off the mortgage on that and continue with the second mortgage.

However a btl mortgage would give us the opportunity to rent it out if necessary, however we would then have to remortgage once our original house is sold.

What would you do? Does anyone have an opinion? Pros and cons?

specialsubject Mon 17-Oct-16 16:16:01

If I understand correctly , it is the one you are buying that you want to rent out.

Fine either way, but you need to be aware of all the responsibilities of being a landlord, the real costs and the penalties for getting it wrong. And be able to cope financially if your tenant moves in and then stops paying and/or starts wrecking, a situation which can take six months or more to resolve.

specialsubject Mon 17-Oct-16 16:17:11

...or if your tenant keeps paying, doesnt wreck but wont leave when you plan.

Mortgagedilemma Mon 17-Oct-16 18:40:59

Just to clarify we don't actually need to rent either out financially. We can easily afford both mortgages.

It would alao only be a temporary measure until our original house sold. I have no real wish to be a landlord.

My question was about the pros and cons of getting a second residential mortgage vs a buy to let mortgage.

specialsubject Mon 17-Oct-16 19:22:49

In that case, dont do it. Get a house sitter if required .

Mortgage rates are lower if not buy to let.

user1471549018 Mon 17-Oct-16 20:17:03

What are the figures involved? There would normally be hefty early repayment fees for either option, and also require large deposits. Is there any option of remortgaging your own house to release enough equity to buy the second house instead? Another option would be to port your current mortgage to new house and rent out your current house with a btl mortgage. Also don't forget about the increase in stamp duty for second homes (although you can claim it back if you sell your first home within a specified time i believe).

Sunnyshores Mon 17-Oct-16 21:45:41

You'll pay thousands more in Stamp duty under either option,plus redemption fees, mortgage arrangement fees etc plus a new mortgage couldnt be arranged for at least 3 weeks anyway. By this time your house could be sold.

Do you know the vendors want a quick sale?

Id just be upfront, offer on the house you want whilst your house is for sale - soon to be under offer hopefully. You could offer a higher price as you wouldnt be wasting money getting a second mortgage.

I really think its best not to overcomplicate things or pretend to do BTL when really youve got no intention.

Mortgagedilemma Tue 18-Oct-16 08:26:50

Sunnyshores, they do want a quick sale.

We know about the extra tax, but as the plan would be to sell house no 1 then we can reclaim that back anyway.

That was why we were going for a second residential mortgage as we have no intention of letting either house out and it would essentially be the mortgage we would have had anyway so no need for early redemption. We would just pay off the original mortgage once that house was sold.

I was just wondering whether we were missing a trick with a btl mortgage, but I don't think so. Thanks.

Sunnyshores Wed 19-Oct-16 14:22:57

I dont think you can reclaim stamp duty. Its a purchase tax.

I would have thought it would be quicker, easier and as cost effective to sell your house at a cheaper price.

NinjaFeminist Wed 19-Oct-16 14:45:22

I'm in a spookily similar dilemma so place marking for useful info.

I'm edging towards buying 2nd residential, while working on 1st property over a longer period of time, then possibly selling 2nd property when I no longer need it (5/6 years tops). By the time I get to move back into 1st property I'm hoping it'll be fully renovated by then.

Is there such a thing as a mortgage with the option to switch to being able to rent if 1st property renovation finish earlier?

Mortgagedilemma Wed 19-Oct-16 16:09:45

Sunny shores you can reclaim it

JoJoSM2 Thu 20-Oct-16 00:04:47

Have you spoken to a broker? There might be a special kind of mortgage for your circumstances.

BackforGood Thu 20-Oct-16 00:28:35

Sunnyshores - you can reclaim the extra you pay on a 2nd property, if you sell the property you already own within 18 months.

Undersmile Thu 20-Oct-16 01:11:22

Isn't this what a bridging loan is for?
If you have two residential mortgages, you will be referred to the underwriters, and you'll likely need a 25% deposit on the 2nd property.

Mortgagedilemma Thu 20-Oct-16 05:57:45

I have more than a 25% deposit for both properties. Bridging loans are only if you have concluded missives and very hard to get these days.

Undersmile Thu 20-Oct-16 07:22:34

In that case, I would just buy the second property on a normal mortgage and not rent it out, pay off other when your original house has sold. I don't think you'd benefit F from btl mortgage as the rates are less favourable than residential.

lostinlego Thu 20-Oct-16 10:28:04

We are in a similar situation, and we just got permission to let on our original property incase it doesn't sell as quick as we want. That way we could get a second residential mortgage which was much cheaper than changing 1 to a buy to let mortgage.

Sunnyshores Thu 20-Oct-16 13:51:52

useful info on reclaiming stamp duty thanks!

elfofftheshelf Thu 20-Oct-16 17:03:48

We are in the midst of doing exactly this. We didn't want to end up in a chain, so we are porting our existing mortgage to our new property and we have taken out a second (residential) mortgage on our existing home. It's been a bit of a faff, and there are valuation fees, but it still works out much cheaper than bridging finance. We were referred to underwriters for the loan but as our total lending is only 75% of what they said we could borrow it was a very quick decision. The extra stamp duty is a worry, but as you say, you can claim it back provided you sell in time and we've factored this in to our decisions.

Lesley1980 Fri 21-Oct-16 21:52:39

We bought our house before we had sold our flat & we just took out a second residential mortgage.

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