# Remortgaging/buying new home advice



## Lsmcdti (Aug 14, 2015)

So, we bought a newbuild house in 2017 and now believe we have about £30k equity in it, i would like to buy an older house to renovate to exactly how we want it but how would i use the equity in the house to do that, can i use it as a deposit on a new house? is there a way i could buy another house before selling my current one? Thanks


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## Rob_Quads (Jul 17, 2006)

If you want to get out the 30K equity on your house you would need to apply for an extra mortgage on your existing property. Whether you will get it is another matter. 

Even if you got it out, and wanted to use it as a deposit on another house you would still need to be able to afford the mortgage on the 2nd properly as well so you need to have a fair amount of spare cash around at the moment.


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## Darlofan (Nov 24, 2010)

If buying another whilst keeping yours until ready to move you'll need a bridging loan. It'll be more expensive so if yours takes time to sell it will cost. Doing it this way, mortgage company will get a valuation done(it'll cost) then any equity can be used as deposit. Obviously there'll be credit checks etc done. 

Re your 30k equity, that will be used in calculating your new mortgage. So keeping it simple. Your original mortgage you owe. 100k. Sell yours for 130k =30k equity.
New House is 200k. You will use 30k for deposit and mortgage for 170k. 
Obviously don't forget fees etc for buying and selling but that's how it works.


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## The Cueball (Feb 8, 2007)

also, depending on where you are and the value of the 2nd home, you'll need money for the 2nd home stamp duty that needs to be paid.

So for example.. I think this is still correct, if you're in England and the 2nd home is the £200k as per the above post, you'll need to find £6k for stamp duty.

If you then sell the 1st propery within 3 years (again I think), you can claim a refund.

:thumb:


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## Derekh929 (Aug 28, 2011)

You may find if you re mortgage to on the equity many lenders will have a max Loan to Value for raising monies for second home some may even say no, sometimes its max 85%LTV, also its not what you think the property is valued at, many companies do desk top drive past surveys on remortgages and down values are quite common.
If doing up a house know the cost of materials has increased due to supply issues for many stuff, I say you really need good levels of ready available cash savings etc for this know IMHO.
Also you may have fees and other costs to budget for on capitol raising, and is your current lender tied you into a deal at present, with penalties?


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## kingswood (Jun 23, 2016)

do u mean keep both? 

if you do i'm going to be rather stern and say you havnt got a clue. and asking on here wont find the answers. google would be better.

to many people see landlord'ing as a get rich quick scheme.

in a nutshell any second home attracts a 3% stamp duty. you pay 20% tax on ALL earning, not just the income like before. and if someone stops paying it will take you 6 mnths to get them out. and BTL mortage rate is higher, and that depends if you register as a limited company or not (that helps with the tax bill)

it was good untill about 2015 when the stamp and tax changed. thats why everyone sold up.

depending on where u are and what values we're talking about 30k equity isnt a great deal. and what you think its worth and what you get is 2 different things.

if you want to move into a older house and do it up then sell yours and buy a wreck and live in it. then you'll build more equity and a lower LTV


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## fatdazza (Dec 29, 2010)

As others have said, the only way to release equity is to sell the house or borrow (mortgage) against that equity.

If you have £30k equity in your current house, and by that you mean the house is worth £30k more than your outstanding mortgage, then you will not be able to borrow the full £30k as no mortgage lender will lend to 100% of the value of the house.

Also mortgage lenders these days have to check that you can afford to pay, so that will also limit the amount you can borrow.


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## Darlofan (Nov 24, 2010)

kingswood said:


> do u mean keep both?
> 
> if you do i'm going to be rather stern and say you havnt got a clue. and asking on here wont find the answers. google would be better.
> 
> ...


Spot on with this. Tuesday I was round a mates house with my trailer taking a sofa and coffee table to the tip. Left behind by tenants that owe now 13k!! Stopped paying her rent Dec 2019, eviction started, then Covid hit in March. Evictions were outlawed, obviously good for those who lost jobs etc but not for my mate. Tenants eventually walked out last week. Flat needs a deep clean(I've seen worse) and a decorating right through.

On flip side, I have another friend who moved in with her now husband and rents her house out. Same tenant for 8yrs now and house and garden is spotless, perfect tenants.


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## fatdazza (Dec 29, 2010)

Same old risk versus reward trade off.

Renting a property can be a good earner if you have a good tenant.

Likewise can be a nightmare with a bad one.

If you have a dozen properties you can spread the risk, as you are unlikely to have a dozen bad tenants. With only one rental it can be a bit like red or black on roulette.


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## The Cueball (Feb 8, 2007)

kingswood said:


> you pay 20% tax on ALL earning, not just the income like before.


Do you mean that any profit from your leased property is added into your "normal" taxable income for your self assesment?

You don't get taxed on your property GROSS income, you are still allowed to take off allowable expenses.

:thumb:

HMRC guidence



> You must pay tax on any profit you make from renting out property.
> 
> Your profit is the amount left once you've added together your rental income and taken away the expenses or allowances you can claim.


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## SteveW (Feb 21, 2006)

I'd also take the equity value you _think_ you have with a pinch of salt.

We bought our current house in November 2018 for £298,950 (new build) and had to remortgage in November 2020 as our 2 year fixed rate ended. We were expecting it to be worth possibly somewhere between £310-320k going by various estimates we'd been given.

In the end it was valued by the lender (Santander) at £300,000 - which meant we had to pay out an extra £2k to get the best deal we could based on LTV etc. It was fine, not an issue, we had the money in the bank anyway so could afford to do it - but it was a bit of a surprise nonetheless. On the plus side, it was another £2k paid off the mortgage in one hit  (And we're now over paying by over £100 a month because our fixed rate is cheaper than the last one was )

So all of these "house prices rising by over 6% per annum despite covid etc" reports you can read anywhere proved to be absolute bull as far as we were concerned :lol:


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## Shug (Jul 13, 2007)

There's a stamp duty holiday on properties under a certain amount til 31st march, so some people are rushing to avoid paying stamp duty after that.


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## Andy from Sandy (May 6, 2011)

I was going to mention the stamp duty holiday.

I also think it a bit disingenuous to think that no-one on DW is a landlord and that none has any knowledge of the details involved in renting out a second property.

The 6% price rise is probably an average so some you are up and some might actually be down.


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## MDC250 (Jan 4, 2014)

SteveW said:


> In the end it was valued by the lender (Santander) at £300,000


For many years banks have been conservative with valuations, surveyors have been lent on by the big institutions to do so to protect their investment.

If you have a very healthy LTV it doesn't make a difference in the main but if it's marginal then it could impact what rate is offered. You were OK as you could pay down to get the extra equity "in".

The SD holiday has created a false market and prices are too high, which means they will only go one way as the market corrects. Hopefully peeps are not too stretched and come out of fixed/capped rates into a different market place or it could be carnage.


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## SteveW (Feb 21, 2006)

MDC250 said:


> For many years banks have been conservative with valuations, surveyors have been lent on by the big institutions to do so to protect their investment.
> 
> If you have a very healthy LTV it doesn't make a difference in the main but if it's marginal then it could impact what rate is offered. You were OK as you could pay down to get the extra equity "in".
> 
> The SD holiday has created a false market and prices are too high, which means they will only go one way as the market corrects. Hopefully peeps are not too stretched and come out of fixed/capped rates into a different market place or it could be carnage.


Yeah, it was one lender that actually "estimated" our house was worth £320k, based on Zoopla FFS :lol:

As you said, we were OK because we had some spare money to get us over the line for the best rate anyway so it didn't really matter that much in the end.

From a purely personal perspective, I'm hoping we'll be OK in two years when we go for our next rate change as we're now over paying and may even over pay more than we are if can afford to at some point, so IF prices stagnate or even drop a bit, we might have taken some of the hit with our overpayments to stay on the best rate with regard to LTV


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## MDC250 (Jan 4, 2014)

Zoopla estimations are terrible. Would love if it was right about my house. But it isn't


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## SteveW (Feb 21, 2006)

MDC250 said:


> Zoopla estimations are terrible. Would love if it was right about my house. But it isn't


I know, I was shocked that the lender (Nat West) were using that as their estimate when working out what they could do for us.

I didn't expect to be worth anywhere near as much as that high estimate but definitely expected it to have gone up a bit in value given that identical houses, with smaller gardens and shared driveways are selling for more now than ours went for two years ago on the same development.

Ah it's all fake money anyway unless you're downsizing


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## Rundie (Oct 2, 2007)

I've got two properties on the market atm, neither are looking like they will get what I thought. Dropped £25k on each in the last few months, thought the stamp duty holiday would help shift them but the market is slow.
I've considered bridging loans for buying in the past but would avoid the risk with the current uncertainties.


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## kingswood (Jun 23, 2016)

Andy from Sandy said:


> I was going to mention the stamp duty holiday.


All second propertys incur the 3% stamp duty charge


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## kingswood (Jun 23, 2016)

The Cueball said:


> Do you mean that any profit from your leased property is added into your "normal" taxable income for your self assesment?
> 
> You don't get taxed on your property GROSS income, you are still allowed to take off allowable expenses.
> 
> ...


the link is perfect for the OP. i was surmising - the allowable expenses are no where near as generous as before.

before the tax law charges the actual mortgage was dedutable as an 'expense'. now its not. makes a big differnence to the yield


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## fatdazza (Dec 29, 2010)

Yes previously with buy to let you could offset all of the mortgage interest against any profits. Now you only get a tax credit based on 20% of the interest.


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