Can we take out a mortgage on our second property to buy a third one?

Posted on 4 February 2008

I currently have a joint mortgage with my parents which is £165k. My salary is £25k and my parents salary is £35k. The property is valued at £450k and we have a borrowing agreement with our lender of up to £300k. We have used some of the equity to purchase a 2nd property with the intention to Let it out. The 2nd property is valued at £230k with a rental income of £23k and no mortgage. I would like to take out a mortgage on the 2nd property so that I can then buy a 3rd property.

What kind of mortgage do I need? How much can I borrow? Do I use my income to calculate the new mortgage, the rental income or a combination of both? Which lenders would you recommend that would lend to my type of borrower?

Many Thanks,

TJ

Hello TJ,

You need a buy-to-let mortgage. Buy to let mortgages normally go as high as 85% loan-to-value, so If the property is worth £230,000, your highest loan is £195,500. Assuming an interest rate of around 6%, This would require rental income in excess of £11,730 annually, plus a margin for many lenders, so your rental income of £23,000 is fine. It will be in the names of all the people on the property deeds; if this doesn't suit, speak to a solicitor about buying if from your family.

As for lenders, there are hundreds and you have good rental income so you may prefer a higher rate with lower fees. You also need to give full details of the length of deal you can commit to, and what your views are on interest rates. Different lenders also ask that you are not a first-time-buyer, and that you have minimum income of your own, and various other factors. An advisor will run through what you need on the phone, tell you what lenders can do this for you now and give you some quotes of their best deals currently for you to have a look at. My responses can only be generic on here so please call Charcol and speak to an advisor: Charcol does not charge a fee, and Charcol also has access to the whole mortgage market. The number is 0800 358 5560.

Best of luck.

Category: Buy-to-let, Second properties

 

Answers provided in response to Ask Bea are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not neccessarily represent the views, positions, strategies or opinions of Charcol Limited. All comments are made in good faith, and neither Charcol Limited nor Bea will accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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