While you have no plans to move at present, the idea of owning some type of residential or commercial property as an investment makes sense. The right arrangement would create a steady income stream you could put to good use now and in the future. What remains is to determine how to finance the purchase of that investment property. A second mortgage would be an excellent approach. Here are some tips on how to go about obtaining that mortgage and securing the property you want.
It’s true that obtaining a second mortgage in London for any reason is more difficult than in the past. Owing to the economic recession that affected North America and other parts of the world several years ago, even lenders who specialize in high-risk venture tend to be more cautious. That should not prevent you from seeking the financing you need to purchase an investment property. All it means is you should be more aware of what how lenders are likely to approach your application.
One possible strategy that the lender is likely to use is taking a look at how much equity you have in your present home. Equity is the value of the property less than the amount you still owe on your primary mortgage. For example, you may have $200,000 equity in your home. The lender may be willing to approve a second mortgage for as much as 80% of that equity and accept your home as security.
Even when you have a lot of equity in your current home, expect lenders to give some attention to your current credit rating. Even lenders who offer poor credit mortgages in London will be interested in the information found on your credit reports. Those lenders will place more emphasis on how you’be been doing the last couple of years and not just the score itself. If there were some issues when you will out of work due to an illness or in between jobs several years back, they will be less important than how you are managing your debt today.
Remember your current rating will impact the terms you care able to secure. A higher-risk lender will offer slightly better terms if your score is moving up slowly and you are not creating additional unsecured debt. That will be good, since it positions you to be able to pay less interests over the life of that second mortgage.
How will you budget for the additional expenses that come with owing an investment property? While obtaining a personal loan would likely mean paying less attention to this factor, many lenders will want to know how you would keep up the mortgage payment even if you did not have a tenant for a time. There’s also the matter of how you will afford a reasonable amount of insurance on the property and pay for the upkeep. By having a plan that shows how you could manage even if the property did not have a tenant for several months, you increase the odds of being approved.
If your dream is to own investment properties as a way to generate income and build a nest egg for the future, talk with a professional who can help you explore the merits of a second mortgage. You are likely to find this approach is exactly what is needed.