Second-time buyer? We offer some guidance on second mortgages.
Mortgages can be complicated at the best of times. When you are a first-time buyer, getting your first mortgage seems to be full of obstacles that appear to be designed to keep you from your goal. But, however complicated your first mortgage seemed to be, applying for a second mortgage has a whole new set of rules.
People apply for second mortgages for several reasons. One reason is to raise a mortgage on a new home they wish to move into. This is a second-time buyer mortgage. Another reason is they are looking for a mortgage to finance buying a property they plan to let out. This is known as a buy-to-let mortgage and has a different set of rules for the first time buyer and second time buyer’s mortgages. The second time buyer mortgage can be fairly simple, although there are certain circumstances when it can get complicated.
So let us shine some light on two of the second mortgages:
Second-time buyer mortgage
The second time buyer we are going to concentrate on here is someone who has sold their home and has been renting while looking for another house to live in. Although they will not currently have a mortgage they will be considered a second-time buyer. The advantage of this is they will probably have made a profit on the sale of their first home and will have a considerable amount of money for a deposit. Another advantage is if they had kept up the payments on their first mortgage, they will have a good credit rating. This will make them an attractive customer to lenders and make it easier to obtain a second mortgage at a favourable rate.
In terms of disadvantages, being considered a second-time buyer will not make you eligible for the various schemes on offer to help first-time buyers enter the property market. However, some lenders will consider people who have been away from the property market for three years as first-time buyers. It may pay to shop around.
Although buying to let is still a good way to invest money, obtaining a buy-to-let mortgage is becoming harder. Recent new powers granted to the Bank of England have made it more difficult to
obtain a buy-to-let mortgage. The Bank is worried that a leap in interest rates will leave many landlords unable to meet the monthly repayments on their mortgage. They now insist lenders introduce very strict checks on the borrower’s ability to service their loan. Many lenders are insisting borrowers take out more expensive five-year loans rather than a cheaper two-year loan. The five-year loan gives the lender more security.
From September this year, any landlord with four or more properties will have to provide proof the incomes on each of their existing properties are covering all mortgage repayments and maintenance costs. Without this information, they will not be able to obtain any further buy-to-let mortgages.
But the picture is not all black. The two types of second mortgages are not the only available on the market. And there are plenty of lenders who will offer a sympathetic ear to people looking for second mortgages. You just need to know how to find them.
For more help and guidance, why not contact us today