Wednesday, 24 July 2019

SECURING OF THE SECOND PROPERTY

I personally have always wanted to go into property, build up my own empire and house the many tenants of the North West and with the help of my better half, we're now one house in, and hopefully many to go.

As some long term readers may know, although I've long since deleted the post because I was not producing top quality blog content back at age twenty two (or even now, but alas, it has improved slightly), I bought my first house back when I was a tiddler, fresh out of uni and desperate to get on the property ladder.

Even back then, I had my plan: buy a house which I could live in short term, in an area that would rent well when the time was right, with a cheap enough mortgage that my tenant would cover it in their rental payments, but if it was empty at any point, that I'd still be able to cover alongside my other financial commitments.

When I met Ryan last summer, I was surprised and chuffed to learn that he too wanted to get into property and so, after deciding pretty quickly we were both in this relationship for the long haul, we decided to pool our resources and buy a house together, meaning my previous house would be available to rent out and to start our landlord journey.

We soon found a house we loved and wanted to put in an offer but after a bit of research and enquiring with my current mortgage provider on the Lancaster house about the possibility of buying a second property, they needed twenty five percent of the house value by way of deposit for affordability reasons mostly. This combined with stamp duty, as we were not first time buyers, at 3.something percent seemed impossible at the time and we figured that we might have to put the dream on hold for a while and save up some more.

When we heard that someone else was keen on our dream house, this was a pretty big blow but instead of admitting defeat, I decided to get in touch with Alan, my previous mortgage broker from the Lancaster house and see if there was anything he could suggest.

We were really against it here with it being a second property, having to put in five percent due to stamp duty swallowing the remainder, Ryan was also having three months out between his previous and new job. We weren't sure what Alan would find. It was at this point when I think my brain melted and I decided we weren't going to be able to do it. But charging out of that dust cloud of despair charged in Alan on his mighty steed with a solution of a lender who was willing to accept a five percent deposit and with that, it was on. Interestingly, it was actually with the same lender as my Lancaster property, who had previously told me they couldn't do anything less than a twenty five percent deposit. I guess it pays to get a broker involved.

First step was to get my Lancaster property valued for rental purposes, before asking the lender to Consent to Lease. Even though it wasn't rented out at the time, the lender would then take this letter from the letting agent as evidence that I would have the amount stipulated as income each month once we had moved into our new home. This meant the affordability with two mortgages issue was resolved.

The next issue was Ryan's gap in employment. Many lenders wouldn't touch us because of this combined with my other property, most require you to have six months continuous employment with the same employer as a minimum, or if you've swapped jobs, to have a gap between roles of no longer than four weeks. The lender we went with required sight of Ryan's new contract, start date and salary and they were happy to lend on that basis.

I wish we could tell you that from this point on it was smooth sailing, but it wasn't.

We put in our offer, there was back and forth, before it was eventually accepted. We felt that we were overpaying in terms of what the house's true value was but we adored the property and so were prepared to do so. We asked  the seller to leave a fair bit of furniture as we'd hoped to apportion this on the contract in order to bring down stamp duty by a few quid as it really was very high. This was all agreed and all the usual legal bits and pieces commenced.

Then came the blow of the survey. We needed a survey in order to borrow. Unfortunately, the lender's chartered surveyor down valued the property. By a lot. We were gutted because we knew we'd had to really push to get the seller to accept our significantly higher offer and felt she would now surely back out of the sale. It was a gruelling week waiting to hear back in relation to what she had decided to do, we actually panic booked a Center Parcs weekend at four days notice to cheer us up if the worst news came, but it didn't and the seller decided that she would sell to us for the property's true value. Less the furniture. Which was fine because the stamp duty had been reduced as a result of the new value and so apportionment wasn't as important at this point.

It was then a pretty turbulent time until completion, but we finally got our keys on the 12th April and are almost in a position to rent out Lancaster, which I'm excited for as I'm currently covering two mortgages. Ouch. Well, one and a half. I'm glad past me was sensible with that side of things meaning I am able to afford both until Lancaster is tenanted, but of course, the aim with property rentals is to make money and so I'm excited for that time to arrive now. That said, the rent will essentially be covering the mortgage and landlord insurance by the time tax is taken, but I'm thinking longer term, and towards our early retirement plan, when the house will actually provide us with a small income. One down (almost, ish, nearly) and hopefully many more to go.
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