Is there a way around needing 20% for a second time buyer?

C

candyman

Registered User
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Situation: Non 1st time buyer, mortgage on PPR is paid off, tracker mortgage on 1 rental property remaining.

Question: Would like to acquire a second rental property but as a non first time buyer, current rules indicate I need 20% deposit up front which is not going to work for me. So is there a way to purchase a property to rent out that does not need to comply with this rule?

What about setting up a company to purchase the property under and rent it out that way - do the same rules apply here?
How would I get the rent money back out of the company in this scenario? This is just one idea I am thinking about.

Does anyone know of any other ways to achieve this? ... or am I stuck with needing a 20% deposit up front?

Many thanks to all AAM'ers that take the time to read and respond.
candyman
 
First of all, you need a 30% deposit for a Buy to Let

Loan-to-Value limits
The LTV limit requires you to have a minimum deposit before you can get a mortgage. The size of this deposit depends on what category of buyer you are.
  • First-time-buyers need to have a minimum deposit of 10%
  • Second and subsequent buyers need to have a minimum deposit of 20%
  • Buy-to-let buyers need to have a minimum deposit of 30%.
Banks and other lenders have the freedom to lend a certain amount above these limits. In any one calendar year they can give an allowance to:
  • Up to 5% of the value of mortgages to first time buyers
  • Up to 20% of the value of mortgages to second and subsequent buyers
  • Up to 10% of the value of mortgages to buy-to-let buyers.
But the banks can make an exception for you.
 
You actually need a 30% deposit for a BTL.

Lenders can give exemptions in 10% of cases but I don't think lenders have much appetite for BTL loans these days.

[Edit - apologies for the repetition, post crossed with Brendan's post]
 
If you don't have the 30% you probably should not be buying another buy to let property.

You could go to one of the non-banks and they might give you a mortgage on your home for the deposit.

Overall, your best approach is to go to a mortgage broker who would know how to present your case.

Buying through a company is dealt with in plenty of other threads. In short, it's a very bad idea. You get hit for tax in the company and again when you take it out personally.



Brendan
 
Brendan Burgess said:
  • Up to 10% of the value of mortgages to buy-to-let buyers.
But the banks can make an exception for you.
Click to expand...
If I remember correctly, there wasn't a single exemption granted last year.

The 30% is embedded in banks underwriting criteria even if there wasn't a CBI rule.

The only way around it is for those with a portfolio to remortgage the entire portfolio using equity in other property, and giving the bank full cross collateralisation.
 
RedOnion said:
The only way around it is for those with a portfolio to remortgage the entire portfolio using equity in other property, and giving the bank full cross collateralisation.
Click to expand...

Would I be right in thinking OP would be unlikely to keep the tracker with this kind of arrangement?
 
Many thanks all. A pretty depressing picture for anyone contemplating small scale further investment (1-2 properties) in bricks and mortar in this country. Will have to look at other ways to diversify now.
 
But your proposal was based on borrowing rather than investing, was it not? And if you're looking to diversify property is probably not the way to go.
 
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