If you’re already thinking about buying a second property, we have to pause and salute you. In a troubled economy, it can feel like pulling teeth just to get into your first property. But if you’ve taken all of the rightly steps and you have everything going for you, then a second property can be a good thing. You can either buy your second property to use as a rental place, or you can turn it into a vacation home. Who needs silly hotels when you can have a home away from home, literally? Either way, you’re going to have to deal with those pesky mortgage lenders and that means knowing where you stand and what you have to do carefully.
You want to look at your first home. Do you have equity in it? If so, you can release the equity through a remortgage situation. This would mean that you don’t need a mortgage for the second property — you just use the proceeds from the remortgaging solution on the first one. However, if you don’t have enough equity, then you’re going to have to visit a second mortgage situation. It bears warning here that if you don’t have the income to maintain two mortgage payments, you’re much better off making sure that you stick to the one. A lot of people rush to a second property, thinking that they will make enough as a landlord to not really worry about that second mortgage. Unfortunately, not every rental market is that strong. Even if you’re buying while rentals are at a premium, you just don’t know what the future holds. You need to view real estate as a long term strategy, not a short term one. Just because it’s sunny outside now, metaphorically speaking, doesn’t mean that the clouds aren’t going to come in.
You will want to get a buy to let mortgage if you’re going to rent the property out. Having a deposit helps because it lets the lender know that you’re serious about stepping up as a landlord. Having savings to cover repairs can also sway lenders, because they know that they’re taking a higher risk that you’ll default. Even if you have no doubt that you will, there’s always that chance. Lenders do not like defaults because they’re going to lose money. Lenders will also look at the potential income that can be generated from that property, which is why buy to let mortgages tend to have higher interest rates.
If you’re trying to buy in another country, like Spain or Portugal, you’re going to find that you’re limited on the mortgage lenders that will give you a mortgage on another property in another country. Foreign property markets can be volatile, which introduces a whole new level of factors into their decision. However, it is possible to find anything you want with a little more effort. Good luck, no matter which path you choose!