Second Property

[lockem]

Hi all,

I apologise if this question has been dealt with elsewhere, but:

I am about to clear the mortgage on my first property and am looking to buy a property to either residential let or holiday let. I have been wondering if there was any way that I can raise a mortgage without having to find a huge deposit as this would take time to raise.

I obviously will have to take a BTL mortgage (I assume?) and from what I can see, to get a decent one I'll need anywhere from 10% to 25% deposit - this seems very unfair - as I have equity in my first property and a decent chunk of disposable income from not having the original mortgage repayments to make - where is the risk to the bank?

I'd appreciate peoples comments/thoughts on the above as this seems to be my biggest stumbling block at the moment!

thanks

Matt

[jflet5]

I think the best thing to do would be to release the equity you have in your residential property rather than pay off the mortgage.

The rates you will get on this will be much better as you'll be aquiring a residential re-mortgage as apposed to a new BTL.

I think you may also be able to dedcut the interest payments on the re-mortgage from your rental income, as the loan is being used for business purposes, but you may need to check that out as it will still be secured on your resisdential property??

either way you need to think about the cheapest way to borrow the money you need to purchase the investment property. So if you already have equity it's probably better to relase that and pay it back at a lower interest rate than you would on a BTL.

[lockem]

Thanks, that makes sense and I had considered that - would I be breaking any law/rules by taking money against my current property and effectively using it to purchase a second property?

[jflet5]

No, you wouldn't be breaking any laws.

The thing you need to check out is whether or not you'd be able to offsett the interest payments on your new loan if it was still on your residential property.

Most landlords do (or did) release equity from properties in their portfolio that had appreciated in value to put down as deposits to aqcuire new ones. Obviosuly the payments on the mortgage went up but this was more than off-set by the income they received on the new rentals AND the fact they could deduct interest payments as an allowable expense.

You need to find out in your circumastace if you could do this as it makes a big difference.

Someone on here should know.