Please come tell me if I can have 2 mortgages on 2 properties without a deposit?!

[Chavmum]

Is it possible? I have a mortgage on my house (with quite a bit of equity). I want to buy and live in a second house but keep my old house and rent it out. How can I fund a second mortgage without selling my old property and using the equity as a deposit for the new property. Is there anyway I can change my old mortgage to a buy to let mortgages and take on a second mortgage without having a deposit to put down?

[Chavmum]

bump?

[oreocrumbs]

You will have to put a deposit on the second house, but you can turn the equity into cash by re mortgaging your current home for a higher amount and when that comes through you will have the 'cash' to put down on a new house.

Thats the theory anyway, you would have to speak to your lender to find out if you are eligible etc. You must also tell them that you intend to rent out your house, and probably switch to a buy to let rather than a 'normal' mortgage.

Remember there will be arrangement fees etc on both mortgages.

[Chavmum]

So does that mean, my first mortgage mthly repayment will increase as I'm in effect borrowing more?

[oreocrumbs]

Yes, so you will have to check to see which is cheaper - to mortgage more or to take a loan. You will be borrowing money either way.

It might be worth speaking to an IFA who will know about more unusual/specialist lenders - there may well be some who will do something like this, but my 2 banks RBS and Halifax wouldn't take into account any of the equity in my other house when I bought this one - unless I wanted to remortgage.

[Levantine]

I looked into something similair recently and was amazed at how expensive buy to let mortgages are. You need to ring someone like london and country as a first step I think. They're really good

[oreocrumbs]

Yes that is very true. If you switch your mortgae to BTL, it is very expensive compared to a regular mortgage. I don't know how easy they are to get now as well. With a buy to let, the income for paying the mortgage is rental income. As rental income is not guaranteed you become high risk and so it costs you more. I don't know if they require another source of income to lend against as well since they tightened everything up.

So even if you do not borrow any more money against house 1, if you switch to BTL your payments will go up.

[Levantine]

The arrangement fees were v high too iirc

[QuintessentialyHollow]

Buy to let mortgages require a deposit of 25 %. Most banks will also set a valuation of the rent, and will want to see mortgage payment at 110% of the rent evaluation of the property. This means that on a 535k house, you need to factor in around 145k on deposit, stamp duty conveyancing and legal fees. Banks will want to see rent at between 2100 and 3000 pcm, and a monthly mortgage payment just under this.

This means that the equity in your house should not be less than 25% of sales evaluation, when you release equity for deposit on your other house, and that the rental income evaluation is fair and covers your mortgage, and landlords insurance. I am now referring to doing buy to let on your current home.

Then you can get a standard mortgage on your next home, with a 10% deposit, based on the equity raised from your other home. Then, the fun starts finding tenants.... Good luck. But see a mortgage adviser. I recommend an independent one with access to all the products from all the lenders.

[caramelwaffle]

Yes, it is possible: it is called Let to Buy.

[Chavmum]

From what you're all advising, I think I probably can't afford it then and will probably have to sell the 1st house :( I was hoping I could just convert it into a buy to let mortgage, I have tenants who will pay enough to cover the mortgage as it is now and a bit more. I was hoping the equity I've got would then go towards the deposit on my new mortgage. But it doesn't sound like that will work :(

[oreocrumbs]

See an independant advisor, they will tell you better what the current lenders want. And look into let to buy that caramel mentioned. I havn't come across that.

[sevenbubbles]

I did this with Halifax. I applied for equity release on my first property and drew down 60k (this still left substantial equity in that property btw). I then applied for consent to lease on that property. The rate was slightly worse than what was otherwise available.

I used the 60k to fund the deposit on house 2. House 1 theoretically affected how much I could borrow for house 2, but in my case the rental income more than covered the mortgage on house 1 so I didn't have any problems.

Practically all the drawdowns / conversions happen on the same day and I directed all the money to go straight to my solicitor to fund the purchase. Hth

[caramelwaffle]

sevenbubbles explains exactly how it works. I had approval for this also.
Make an appointment with an IFA or Mortgage advisor. Also speak to your current provider.

Good luck.

[QuintessentialyHollow]

I did what sevenbubbles did 4 years ago, with the woolwich. Because I had quite a lot of equity in our house, we were able to release enough equity to do a self build (in Norway) without any mortgage on that house. We now own two houses, which are currently tenanted.

I saw an independent mortgage adviser last week because I wanted to buy a third house on a buy to let, and were exploring options for remortgaging the first house again, in addition to doing a buy to let with merely the rent on the desired new property in mind.

There are so many different scenarios, and so many different terms with the different mortgages the lenders offer, you need to see an independent mortgage adviser.

Their advice should be free. They get their commission from the lender.

[Chavmum]

oooh, it sounds like it might be possibe then, I have a small mortgage on my 1st property with more than 60K equuity :)

Thanks all

[caramelwaffle]

Good luck with everything

[RoccoForte123]

If you purchase two properties in the same year would you pay cumulative stamp duty rates or a stamp duty rate based on the purchase price of each property?

So would I pay 1% stamp duty for each property costing 250k, or 3% duty for both properties since they add up to 500K?

[lalalonglegs]

You'd pay separate sets of stamp duty unless properties were seen as related purchases - eg. two flats in same building.

[flow4]

It's about the percentage of equity, not the amount. You can't have a btl mortgage that's more than 75% (so if your house is worth £100k, you can't borrow more than £75k), to protect banks from any drop in house value. If you have more than 25% equity in the house, you'll be able to release the rest. Fees are high (£2.5-3k) and interest rates are higher than normal. An independent broker will help you make sense of it all.

[RoccoForte123]

Thanks so much for your help lalalonglegs!