How can I get another mortgage to do a property venture with a friend?

Posted on 25 February 2008

Hi Katie,

I currently have a mortgage on my residential home. I am looking at buying a second property with a friend of mine to refurbish and sell on. There are a couple of things I am not sure of, the first being, can I secure a second mortgage to buy the proposed new property which will probably be a repossession? Also, what happens in regards to buying and selling future property if the venture is successful?

Hi Paul,

The easiest route is to take a mortgage on the new one, and it can be a joint one between you both. If you want to take some deposit out of your own home you can, by calling the current lender and asking for a further advance. It's generally best that both of you give equal deposits, just for the ease of splitting profits later.

You can raise the whole lot against your own residential mortgage if you like, but i'm never keen on people getting their home that far in risk, for an investment that may or may not work out.

Saying that, you may have little choice as you have the added problem of the new place being a repossession; I assume that means you will get it from auction?  This means that you normally only have 14 days or 28 days to get the whole mortgage sorted, in order to complete.  This is another reason that raising your half of the money against your own home is quickest as you can start that now, and the new property is not relevant.   Of course, this requires that your income would cover the whole debt.

I also note that you use the term second mortgage, a real second mortgage (a second change with a different lender, on top of your current mortgage) is invariably rather higher in rate. Speak to your own lender about a further advance first, and if they can't help, remortgage to another and capital raise at the same time. Use a whole-of-market and fees free broker to tell you which remortgage deals would be best for you.  Charcol can be reached on 0800 358 55 60 or www.charcol.co.uk. In terms of future transactions, when you sell the project house, you split the profits, and pay them back into your mortgage to get it back down. This means that the mortgage you took on your own place needs to be one with no Early Repayment Charges, or very high flexibility, so you can pay large lump sums back in.

If you intend to do this a lot, I would take a flexible mortgage or an offset so that you can take cash back out again in the future when you're ready for the next one.

Category: The application process explained

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