How IMC Mortgage Brokers Can Help You
Buying property is regarded by many to be a good way to invest your money – even with the extra taxes and fees that the government are charging to those who buy second properties – whether it is for home owners themselves, or for buy to let, the prospect that house prices in the long term are unlikely to lose value, this can represent a good investment.
For those who are considering buying a second property for whatever reason, a deposit will still likely be required and depending on the situation, could be a sizable amount. Any additional borrowing could therefore also result in higher monthly commitments, so it is something that you should think about carefully before embarking on.
Remortgage to Buy a Property
One way of raising the capital to enable you to buy a second property, is through remortgaging; Of course, you need to have enough equity in the property being used to enable you to raise sufficient capital and if a mortgage is still required on the new purchase do also note that the deposits needed are often higher when in relation to a second property.
Second Home or Rental?
Most people who are looking to buy another property are either looking for a second home for themselves, or one of their family, or to be able to rent it out as a specific investment. This may involve remaining in their current home and purchasing another property, or for some a role reversal where they are looking to move but retain their current home as the second or investment property.
Second Property Remortgages
If you are looking to buy a second property for you or a dependent relative to live in, you may consider looking at remortgaging your current home to raise some or all of the amount required. Some of the equity that you have in your home could be released, giving you a lump sum towards the new purchase. Should both of the properties be used for your own personal use or one for a dependent relative, then a lender will have to be satisfied with your income in relation to supporting the total debt when assessing affordability.
Should however you look to retain your current property as a buy to let investment and move into the new property for your own residential use, sometimes referred to as a “let to buy”, lenders could now factor in the potential rentable value of the property being kept to assess the overall risk in relation to the total lending.
Remortgage to Buy a Rental Property
If you are thinking about remortgaging your home to purchase a buy to let property, this could enable you to raise any necessary funds at residential rates which invariably will be lower than those offered for buy to let mortgages. Of course, with a remortgage, your repayments are going to increase on your present mortgage and the criteria for residential borrowing may differ to buy to let, such as interest only as a repayment method, may not be available. You may look to raise part of the funds for the purchase against your own home and the remainder on the subject property being purchased however do ensure you factor in everything when assessing the ongoing cost of the investment.
It is also important to remember that there may be times when your buy to let property is empty or that tenants might fall behind with their rental payments, situations for which you should have a contingency fund to make sure that you can still make repayments and not risk losing your property.
Some mortgage providers offer second home mortgages but it is important to check all of the options that are available to you. For this reason it is important that you do your research properly and ask for advice from a mortgage expert such as our team here at IMC Mortgage Brokers.
Other Considerations
There are also some other factors that you should be considering when thinking about buying a second property.
- Mortgage Fees – Check what fees you might have to pay. Often, a buy to let mortgage will incur higher costs than a comparable residential. You should also be aware that you might have to pay early repayment fees.
- Stamp Duty – Stamp duty can represent a high proportion of any house buying costs, and currently second home buying will require an extra 3% of stamp duty.
- Other renting fees – For those who are planning on renting out a property there may be other fees to consider – such as the use of agents etc.
Buying a property as a second home, or to rent as a buy to let investment can give a worthwhile return on your finances. Ensure you thoroughly research how you are going to fund it and have a contingency for when things may not go to plan. The best way to ensure this it to speak to a qualified mortgage adviser such as our experts here at IMC Mortgage Brokers.
