purchasing second property

[Stacy clarke]

Hi i'm new to the property field, I own my flat outright but I now would like to buy another property to rent out, is a interest only mortgage the best option?

Am i best to save for a deposit and get a mortgage for the new property or borrow against my own?

 

Thanks in advance

 

[DrKidd]

Hi Stacey,

I think the answer to both of your questions really depends on you. I know investors to take comfort in having a repayment mortgage because they feel they are paying off the debt. Personally, I prefer interest only and I use the spare cash flow to maintain my properties and reinvest when I can get a chunk saved up! 

 

Same goes for your second question. If you're comfortable borrowing against your own home to buy another then the potential benefit could mean that you profit on the money borrowed. In my experience, I actually did both. I saved and borrowed at the same time. By the time I had enough saved, my home had risen enough to allow me to release enough to borrow another deposit.

This allowed me to scale from 1 property to 3 and 3 soon turned into 6. As the market has cooled a bit and I start to look at my leverage, I have decided to stop borrowing and continue saving. But scaling my portfolio at the rate that I did now allows me to accelerate my savings as my cash flow is so much better than before

 

Best of Luck! 

[Stacy clarke]

Thanks guys you have all been very helpful Drkidd and damien fogg i am swaying to the interest only idea and saving to reinvest. Yes damien I would really like to chat with you futher 

[James S]

Hi Stacy,

 

Very interesting question and one I've found myself seeking an answer to too!

 

As all the others have said above, it's completely down to your attitude to risk and what helps you sleep at night.

 

I personally use interest only mortgages because it's helps me increase my cash flow, therefore making the next purchase easier. I do think it's wise though to pay down your mortgages once you have increased your cash flow, not only to provide more of a monthly cash flow but to also protect yourself and open up better mortgage deals.

I feel comfortable at 50-65% loan but I'm not against the standard 75/25 split.

 

I would be interested to hear how you get on, so keep me in the loop!

 

All the best,

 

James