Remortgage problem

[moni]

Hi,

I was wondering if it's possible for me to buy a second house without any deposit? My current situation is I own a house worth £300,000 (valued by three agencies) with £215, 000 mortgage on it. Both my and my housband income is £55,000 PA (however my housband is an agence worker) plus £500per month for renting one of the rooms; we also have £20,000 debts which we would like to repay by buying second house, upgrading and selling it. We have found a suitable house for £210,000. Is there ANY chance for us to get remortgage to do that?
Thanks

[Adam Long]

OK so you can't get a mortgage without a deposit in this market, so you need to raise the deposit another way.

If your house is worth £300k and your bank would increase your LTV to 80% you could raise £240k less the £215k mortgage = £25k. NB if you tell the lender what your real plans are for the money they will most likely turn you down so I would tell them the funds are for home improvements.

Your mortgage for the second house would need to be a buy to let unless you want to tell a potential lender that you are buying the second house as a holiday home. So lets presume that you need a buy to let mortgage which you will struggle to get for more than 80% LTV which means that you need £210k x 20% for a deposit = £42k

This leaves a shortfall of £15k for you to find to fund the purchase and in addition there are set up costs for a BTL mortgage, currently mortgage works will charge you 3.5% set up fee or £5,880 (which they will add to the loan) and you need to find stamp duty of £2,150.

Then you need to work out your budget for renovation work and a true resale value once renovated. Do not budget on asking prices in the area you need selling prices for recent transactions. I would take into account that in the current market that you cannot guarantee that the house will even sell at all so would you make money against your mortgage if you rented the property ?

So to sum up, you need to find approx £33k to even borrow the money plus costs of renovation, 2 lots of solicitors fees, estate agents fees on the sale once renovated and add a contingency for unbudgeted costs. So make very sure that you buy the house for the right price and that you are being reasonable in your potential selling price, remember house prices are still falling.

If you still are keen (and able) to proceed with the purchase then good luck !!!

[moni]

Adam,

Many thanks. This is exactly what I wanted to know!
Regards