Buying a second property

[outthebag]

I currently own a small flat which I bought through RTB a year ago. I cannot sell it for another two years, or else I have to pay back a percentage of the discount I received. I do very much want to move when those two years are up, as the close we live in has gone way downhill in the last 7/8 months.

A few people have suggested that I rent this flat out when the two years are over, rather than sell. Im not at all sure I can be bothered with being a landlord anyway, but can anyone tell me how that would work for me buying a second place? Would the equity in my flat count as deposit towards the second mortgage? I received a discount of £11000 on the value, plus will have paid off about another 6/7k by the time my restricted period is over.

Thanks.

Your stamp duty on a second property will be more compared to buying the first place. Try and do your sums! Think about equity in the first property vs what it will rent for. Think about how long you’ll let it out for, one or two years or ten years? Think if the property will increase in value in that time.

Thank you, all things to consider.

Will the equity in my flat count as deposit towards a second mortgage?

If you don't sell you won't be releasing that equity. In order to use it as a deposit you would need to mortgage your current flat to release the money and then put this towards a second property. You'll almost certainly need a buy to let mortgage on the first property both to enable it to be rented out and to make it possible for you to hold a second mortgage on another property. If you don't have tenants for a period will two mortgages be affordable for you? You'll have to pay an additional 3% stamp duty on the second property and will also be subject to Calital Gains Tax in future when you sell.

Renting a property out isn't easy, or something to do on a whim and you need proper advice not just "a few people saying".

Also, the stamp duty is on the whole property price, there is no allowance on a second property.

You would have to eventually change it to a buy to let mortgage (I was given 2 years grace on my existing mortgage, at a 1.5% penalty rate increase when I moved abroad, but eventually you will have to). When you do that, you can release some equity from your property to fund the deposit on your next house. This is what DP and I did - I'd paid of about 60k on my house, when we switched it to buy to let, I took out a mortgage for the amount left, plus 30k, which we then used as a deposit on the next house.