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How to get a second mortgage - buy to let

Updated on October 30, 2009

Remortgaging is the best thing you can do

Did you know that you can get a remortgage that pays for itself? People are doing it all the time with no worries about shared ownership or high interest rates. After getting the best mortgage deal they get it to pay for itself. You might think I'm talking crazy but you would be surprised how easy it is, just another way to work the housing market into your favor. I am not selling you anything, I've done it once so far and want to share my experiences. It wasn't intentional, I just ended up having a second house that paid for itself. Before I carry on, let me just explain what a remortgage is.

What is remortgaging?

Remortgaging is the process of taking out a new mortgage that is secured on the same property as your current mortgage. People usually remortgage their property to lender who is happy with giving you a lower interest rate. They buy out the outstanding loan and give you a new mortgage with added value, assuming the price went up on your house since the time you bought it. Let me give you a superficial case where it would work best: 

You buy a house with a mortgage and after 1 year the price of the house has doubled. That means you bought the house for half its current value. You then remortgage with a new lender, they give you 50% of the price of your house and transfer the original mortgage to them. Not only that but you get a lower interest rate on your new mortgage too! That leaves you with a new cheaper mortgage and a cash lump in your pocket. Now that's just dreaming, but it actually is true and makes sense. If you had an outstanding mortgage on your house and the price went up, you can sell the house, pay off the outstanding debt and kepp the rest of the money in your pocket. Its the same thing, your just using the added value to secure another mortgage. If the value off your house doubled then your are really lucky person, even if it has gone up as little as 5% then you will be eligible for a remortgage.

How I got a remortgage that paid for itself

About three and a half years ago I was living in a small apartment with little rent to pay. I used to love spending my money on everything I wanted, saving by keeping the rent low. I always used to aks myself how can I make loads of money without doing much. Nothing that I tried ever seemed to work, I always ended up spending my money on a stupid investment that always left me ouf of pocket. I then remembered the savings account I set up years ago with a couple of grand in it, I was tempted to withdraw the money on many occasions but thought that it would do me no good in the long run, even when I had outstanding bills I didn't use the money. I got a letter from my bank telling me that the savings scheme I put my money had expired and was asking me what I want to do with the money. I noticed that they were subtly offering mortgages for first time buyers, I had bad credit and had no hope in hell of getting a mortgage but I thought I'd try out of curiosity. I filled out the application and did a quick shop around before sending it off, I knew it might affect my credit rating  so I compared a few other mortgage lenders. My bank seemed to offer the best rate as I was already an existing customer.

A few days went by and I got a call from the bank manager, he was really friendly and asked if we could arrange an appointment soon. I happily agreed and was booked in to see him the early the next week. He asked me what I did for a living and I told him Blogging, his eyebrows raised. I was certain that my application would get rejected at that point. He then asked, "How much do you earn per annum?," I said it depends, some months are good and some are bad. After breifly going through my finances with him, he told me he was happy to give me a mortgage, even considering the ups and downs of my wages. With the money I already had with them in savings, they were satisfied to take it as a deposit - even though it was a really small amount. I was able to buy a small two bedroom apartment and ended up paying a mortgage which was much less than my previous rent! I was laughing, I felt like I was in a totally different class than every other folk, I'm a homeowner now!

The apartment was really shabby and old fashoned, probably not decorated in decades. I knew that it wouldnt be a hard job to modernise for myself so I grabbed it at that cheap price. After living in my newly decorated apartment for three months, I had a really bad month and couldn't find the money to pay for my mortgage and started panicking. My sister then called me and asked if I knew of any good properties to rent and I started rejoicing! I told her I would rent her my place, as long as she gives pays a months deposit. She agreed to move in the next week when my mortgage was due. The rent I was charging was higher than my mortgage, as the price to let properties in that area was high. I called my girlfriend and she agreed to let me move in. 

How I got a second property through re mortgaging

After moving in with my girlfriend, I realised that I just set up my own buy to let scheme. I bought the apartment and was letting it, using the money from the rent to pay the mortgage and have some left over in my pocket. Things got rough with me and my girlfriend and I wanted to move out, I couldn't ask my sister to leave because she had a newborn. I went online and asked on my favorite forum for some advice. One guy told me to remortgage my apartment if I believe the price went up and use that for a deposit on another property. I couldn't believe what I was reading! If I can do that then why arent everyone else doing it? I really sat down and thought about it and it all seemed to add up. I got a valuation on my apartment and found out it went up by 20% in value. I rang my bank up straight away and asked my financial advisor if it was a right move. She said as long as I can pay the new mortgage I don't need to worry about the first one. I can use the added value to my property as deposit and use the new property as security. I do getthe first mortgage paid with the rent from it and I can afford one out of my current income. The bank was happy and voila! I bought my second property a few miles from the first! I was so happy, I couldn't believe I owned two properties at such a young age and I'm no millionaire! I moved in to that place and this is where I'm typing this article right now. My sister still lives in my first apartment and she is still paying the rent, the mortgage for that property is paid off now so I use her rent money to pay for this property. I don't have to pay out of my immediate earnings and I own two properties, its so easy.

Things to remember

Always compare mortgages before buying into them. Alot of the banks have hidden fees and charges that you want to stay clear of. The aim of shopping around is to find the lowest interest rate and the least amount of administration fees. They can come up all of a sudden out of nowhere for ridiculous reasons, read the fine print and always object to a charge that you think is unfair. Always show confidence when meeting with your bank because if you go in nervous, it will rub off on them and make you appear to be a bad investment. Good luck on getting into the property ladder and remember, its easier than it looks!

Comments

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    • profile image

      TJ 

      6 years ago

      Been a landlord 13 years now,all this is true but i do wonder how from not having enough money to pay the first houses mortgage you managed to pay it off in full,was your sister paying you 30 grand a month?

    • profile image

      NaZ 

      6 years ago

      Yes you have to tell ur mortgage company if ur renting the property out, but i own a house on a residental mortgage and its on rent but i didnt tell them and its been nearly 4 years, what they dont no wont hurt them all there concerned about is getting there money back,

    • profile image

      Naz 

      6 years ago

      Thanks for sharing your experience helps alot

    • profile image

      Lewis 

      6 years ago

      When you started renting out your first property did you have to advise your lender that you were doing this and ask their permission? I'm looking into a first buy as a buy to let but it is so much more expensive.

      Thanks

    • keish_777 profile image

      keish_777 

      7 years ago from Jamaica

      Your hubs are great and your writing style is great too. I think the same as you do- want to earn money without having to work my ... off! I'll take your remortgage advice.

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