May 2023: This month we hear from a first-time buyer considering the pros and cons of buying a property at auction, a reader looking for funding options for a second home and an expat who is facing challenges with their mortgage. Neil Bishop offers words of wisdom
Can I remortgage to purchase a second home?
Question
I own my home outright and have been mortgage-free for a year. We have been using every spare bit of cash to overpay and therefore we have very little in the way of savings.
We are now toying with the idea of purchasing a second home by the sea to use at weekends and in the holidays. I have no intention of letting it out. It would be for my family – my husband and three kids.
The home we live in now is valued at £620k and the houses we are looking at by the coast are approximately £250k. As we have very little in the way of a deposit (£5k max) would we be able to remortgage our current home to raise the full price – or at least a healthy deposit – for the second home?
Answer
This sounds like a great idea! Yes, you can – this is actually a very popular way of raising a deposit for a second property.
One thing to be aware of when remortgaging for this purpose is that the running costs (eg: the bills, council tax, service charges, etc.) of the second home will be taken into the overall affordability assessment for the remortgage.
Lenders consider these costs when reviewing your application to make sure you’re not overstretching your finances. I would suggest speaking to a whole-of-market mortgage broker (like us) to see what type of options you have available. Best of luck.
Expat buyer: Why is it difficult to get a mortgage?
Question
I am an Expat and have a mortgage-free house in the UK, which I wanted to mortgage so I could buy something overseas.
The broker I was using told me I could only do this once I had found the property that I wanted to buy and do the transactions simultaneously. As that proved difficult, I lost out on the cheap mortgages available a year ago.
I don’t understand why I couldn’t just mortgage the UK house with a good deal and buy something later since it makes no difference to the mortgage provider. Can you advise?
Answer
I’m sorry to hear you missed out on the highly competitive rates we saw last year. Mortgage interest rates are settling at the moment, albeit not to the lows you are referring to, but you may find that there is a deal out there that is right for your situation.
Lenders will often want to follow the trail of money they are lending to you – this can be to ensure they have a full grip on their borrowers’ situations and for money laundering reasons. Not all lenders take this position, but it is certainly not uncommon either.
My best suggestion is to speak to a broker who will be able to find a lender who can accommodate your situation, and keep in mind your preference to break the link between the remortgage and acquisition.
Can I get a mortgage on an auction property?
Question
I’m a frustrated renter who would love to be a first-time buyer but house prices are too expensive, so I am still waiting to make my move into homeownership.
I have been wondering lately whether buying a property at auction might be sensible. I’ve got some friends who work in various trades so could, over time, renovate to a higher standard.
My only concern is whether it’s possible for a first-time buyer to get a mortgage on an auction property. I have a deposit of £24k and I earn £44k annually. I’m single, no dependents and I have no debt etc.
Answer
I completely understand your frustration. Yes, this is certainly possible, but it’s important to understand that buying at auction is not always straight forward.
It’s great that you have the right people around you to help with any potential refurbishment works, but when looking to buy an auction property for yourself to live in, the mortgage will need to be set up before you go to bid.
As such, unlike a buy-to-let, the property will need to be habitable at time of purchase and be suitable security for the bank to lend against it. If it’s a do-er-upper with potential, there’s a chance the lender won’t offer against it, as the current state of the property may not reflect its true value (and potentially what you are paying for it).
My advice would be to speak to a broker to see what type of mortgage products you may be eligible for. The broker should also be able to point you in the right direction in terms of which lenders are more likely to be comfortable with this type of situation.
If we can help at all, please do get in touch.
Lease extension – do I need to remortgage?
Question
I am about to extend the lease on my flat to 999 years, do I have to remortgage?
Answer
No, there is no need to remortgage when you extend a property’s lease. Assuming the lease length currently is quite low, when the time does come to remortgage (at the end of a fixed rate period), make sure you let the broker know it’s been extended. Having a very long lease length is always more desirable.
Meet our expert…
Neil Bishop, head of residential at Mortgages for Business
As part of the residential desk at Mortgages for Business, Neil can offer advice on an extensive range of scenarios – from those looking to purchase their first home, to those with complex income streams looking to move or remortgage.
Before joining Mortgages for Business in 2022, he managed a team of five brokers at a new build specialist, sourcing finance for home buyers. He’s also the proud owner of a Green Blue Peter Badge!
Email kate.saines@emap.com to ask Neil a question
