Own house outright; want to move. Options?
Discussion
We own our house outright and it is worth ~160k. We would like to move to a new house with a budget/value of around 200-250k. As I see it, we have 2 options. One of which I understand and one I don't:
1) Sell our house. Use the 160k as a deposit on a new house, and take on a small 40-90k mortgage. We did go down this avenue with a mortgage broker last year but we didn't find anywhere to buy so took our house off the market (after 2 offers).
And the one I think would be better but don't understand...
2) Rent out our house. Take out large mortgage on new 200k house. Use rental income from house 1 to pay most of the mortgage on house 2.
I'm thinking it can't be that easy, can it? Would we have to raise a deposit for house 2 mortgage, or could we use house 1 as collateral?
1) Sell our house. Use the 160k as a deposit on a new house, and take on a small 40-90k mortgage. We did go down this avenue with a mortgage broker last year but we didn't find anywhere to buy so took our house off the market (after 2 offers).
And the one I think would be better but don't understand...
2) Rent out our house. Take out large mortgage on new 200k house. Use rental income from house 1 to pay most of the mortgage on house 2.
I'm thinking it can't be that easy, can it? Would we have to raise a deposit for house 2 mortgage, or could we use house 1 as collateral?
LookAtMyCat said:
We own our house outright and it is worth ~160k. We would like to move to a new house with a budget/value of around 200-250k. As I see it, we have 2 options. One of which I understand and one I don't:
1) Sell our house. Use the 160k as a deposit on a new house, and take on a small 40-90k mortgage. We did go down this avenue with a mortgage broker last year but we didn't find anywhere to buy so took our house off the market (after 2 offers).
And the one I think would be better but don't understand...
2) Rent out our house. Take out large mortgage on new 200k house. Use rental income from house 1 to pay most of the mortgage on house 2.
I'm thinking it can't be that easy, can it? Would we have to raise a deposit for house 2 mortgage, or could we use house 1 as collateral?
We do these simultaneous mortgages all the time........you need a Let-To-buy mortgage on the current property to fund your deposit on the new property and then a Residential mortgage for the new property..... 1) Sell our house. Use the 160k as a deposit on a new house, and take on a small 40-90k mortgage. We did go down this avenue with a mortgage broker last year but we didn't find anywhere to buy so took our house off the market (after 2 offers).
And the one I think would be better but don't understand...
2) Rent out our house. Take out large mortgage on new 200k house. Use rental income from house 1 to pay most of the mortgage on house 2.
I'm thinking it can't be that easy, can it? Would we have to raise a deposit for house 2 mortgage, or could we use house 1 as collateral?
LookAtMyCat said:
But would that not mean that we'd have much larger repayments on house 2, with the rent from house 1 only covering the new mortgage on house 1?
Personally I favour option 1 but the wife is keen on option 2!
No, quite the opposite, you would have a large surplus of rent that contributes to the payment of the residential property!Personally I favour option 1 but the wife is keen on option 2!
How much would your current property rent for?
Why not remortgage your current house as a buy to let. Eg take out £120k and use this as a large deposit for your new place.
Ive never heard of let to buy so not sure how this works but Im sure in either case you will need to show you can afford to cover both mortgages at the same time for a certain period in the event of the rental property being empty for certain periods.
The general rule is to never sell a property.
I have never sold any in my life and now own 5 also being mortgage free on my main residence.
Ive never heard of let to buy so not sure how this works but Im sure in either case you will need to show you can afford to cover both mortgages at the same time for a certain period in the event of the rental property being empty for certain periods.
The general rule is to never sell a property.
I have never sold any in my life and now own 5 also being mortgage free on my main residence.
Edited by Audemars on Thursday 28th April 22:35
Audemars said:
Why not remortgage your current house as a buy to let. Use this as a large deposit for your new place.
Ive never heard of let to buy so not sure how this works but Im sure in either case you will need to show you can afford to cover both mortgages at the same time for a certain period in the event of the rental property being empty for certain periods.
"Why not remortgage your current house as a buy to let"Ive never heard of let to buy so not sure how this works but Im sure in either case you will need to show you can afford to cover both mortgages at the same time for a certain period in the event of the rental property being empty for certain periods.
Because he's not buying a property to let.............
"Ive never heard of let to buy"
This is what he needs because he is Letting a property he lives in to buy another...............
Sarnie said:
No, quite the opposite, you would have a large surplus of rent that contributes to the payment of the residential property!
How much would your current property rent for?
House 1 would rent for ~650-700 a month. When we spoke to a mortgage advisor last year she said if we sold our ~160k house and bought for ~250k then the repayments would be ~450 a month on the 100k on-top mortgage. I'd assume then that if we mortgaged house 1 at 75%, took out a mortgage on house 2 at ~100k on top of what we took from house 1 mortgage, we'd have approx 2 x 450 p/m mortgages to pay. Leaving us with ~2-300 a month on top to pay. How much would your current property rent for?
This would be probably be complicated by the fact that I am self-employed and the wife does not work. I guess the bank would certainly take into consideration what would happen if we didn't have tenants for a while how the mortgages would be paid.
Sarnie said:
"Why not remortgage your current house as a buy to let"
Because he's not buying a property to let.............
"Ive never heard of let to buy"
This is what he needs because he is Letting a property he lives in to buy another...............
I know what he wants to do. Read my statement again.Because he's not buying a property to let.............
"Ive never heard of let to buy"
This is what he needs because he is Letting a property he lives in to buy another...............
He remortgages his existing property as a BTL as this is what he wants to let. He takes the money and uses it as a deposit for a new house he wants and takes out a residential mortgage.
In any case he will need to be able to show he can cover both mortgages for void periods.
Edited by Audemars on Thursday 28th April 23:57
We have just done exactly this.
Our home (house 1) had a mortgage of £66k and a value of £110k.
Was looking to upgrade, and so made an offer on house 2.
Remortgaged house 1 to £82.5k (90% LTV) to release equity as the deposit for house 2.
Went through a broker who was absolutely brilliant. He recommended that whilst the BTL came with free legal services, we use the same conveyancer for both, which we did and the whole process was extremely smooth. A colleague did exactly the same thing as us a month later and used the free legal services, hence 2 solicitors, and had a bit of a nightmare.
Our broker told us that BTL and LTB are pretty much the same thing when it comes to the actual mortgage side of things. The lenders see things in pretty much the same way.
Our home (house 1) had a mortgage of £66k and a value of £110k.
Was looking to upgrade, and so made an offer on house 2.
Remortgaged house 1 to £82.5k (90% LTV) to release equity as the deposit for house 2.
Went through a broker who was absolutely brilliant. He recommended that whilst the BTL came with free legal services, we use the same conveyancer for both, which we did and the whole process was extremely smooth. A colleague did exactly the same thing as us a month later and used the free legal services, hence 2 solicitors, and had a bit of a nightmare.
Our broker told us that BTL and LTB are pretty much the same thing when it comes to the actual mortgage side of things. The lenders see things in pretty much the same way.
Audemars said:
I know what he wants to do. Read my statement again.
He remortgages his existing property as a BTL as this is what he wants to let. He takes the money and uses it as a deposit for a new house he wants and takes out a residential mortgage.
In any case he will need to be able to show he can cover both mortgages for void periods.
Read my statement again, as it's the correct one.He remortgages his existing property as a BTL as this is what he wants to let. He takes the money and uses it as a deposit for a new house he wants and takes out a residential mortgage.
In any case he will need to be able to show he can cover both mortgages for void periods.
Edited by Audemars on Thursday 28th April 23:57
He needs a LTB product not a BTL. As per my statement.
And he doesn't need to show he can cover both mortgages.
Sarnie said:
And he doesn't need to show he can cover both mortgages.
That's where the the issue would come in for us as being self-employed and can essentially earn as much as I like up to a percentage of my turnover (just lose receipts). Last year I put in absolutely everything purchase-wise because we only wanted the smaller mortgage (this was going on what our mortgage broker told us). So now if we wanted a larger mortgage, or had to prove we could cover both, we probably couldn't even if I put this years accounts in showing larger earnings.Luckily my wifes parents are quite wealthy and would always help us out if we got into 'trouble, but obviously the bank won't take that into account! We also have a mortgage currently on our stables & land of 450pcm so I expect that will also be taken into account.
LookAtMyCat said:
That's where the the issue would come in for us as being self-employed and can essentially earn as much as I like up to a percentage of my turnover (just lose receipts). Last year I put in absolutely everything purchase-wise because we only wanted the smaller mortgage (this was going on what our mortgage broker told us). So now if we wanted a larger mortgage, or had to prove we could cover both, we probably couldn't even if I put this years accounts in showing larger earnings.
Luckily my wifes parents are quite wealthy and would always help us out if we got into 'trouble, but obviously the bank won't take that into account! We also have a mortgage currently on our stables & land of 450pcm so I expect that will also be taken into account.
Don't worry about covering the LTB mortgage, the rent will do that......Luckily my wifes parents are quite wealthy and would always help us out if we got into 'trouble, but obviously the bank won't take that into account! We also have a mortgage currently on our stables & land of 450pcm so I expect that will also be taken into account.
Sarnie said:
Read my statement again, as it's the correct one.
He needs a LTB product not a BTL. As per my statement.
And he doesn't need to show he can cover both mortgages.
Yes I have read your statement and you were wrong with what you wrote.He needs a LTB product not a BTL. As per my statement.
And he doesn't need to show he can cover both mortgages.
As for Let to Buy it appears it is exactly what I proposed but in a simpler single product.
LookAtMyCat said:
Personally I favour option 1 but the wife is keen on option 2!
I'm with you. What's the wife's contingency plan if property prices fall by 30% and/or you get a nightmare tenant?Would she mortgage your existing house to invest in the stock market? If not, why not? It's exactly the same "borrow to invest" strategy.
IMO your house is your home and not a purely financial investment which you can afford to risk.
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