What made this so hard ?
Once establishing what our budget was through speaking to our financial advisor, my wife and I found a few properties that we were interested in viewing.
We were in a chain of sorts as we needed the value of our flat to be at a specific price for the whole process to work. The standard buy to let ("BTL") mortgage was 75% Loan To Value ("LTV"), and I was sure that we did not have enough equity in our flat to make it work.
In life, you must push your agenda and know what you want.
Being the daring person that I am, I asked the broker to find an 80% LTV BTL Mortgage which according to my limited knowledge was not available on the market, but I thought why not ask the question. In life, you must push your own agenda and know what you want.
With all this in mind, I wanted to be rest-assured if this thing is not going to happen, it won't be because I didn't utilise my brain. To my surprise, my financial advisor found an 80% LTV mortgage product, and that was our first glimmer of hope in the ever-complicated journey ahead.
But the vendor declined...
There was so much hinged on the valuation of our flat, but as the saying goes we "felt the fear and did it anyway". The first few properties that we viewed were okay but did not have the winning formula. We then came across a well-presented end of terrace house, with an adequately sized garden, garage and modern appliances. We decided to put in an offer, but the vendor declined it as they did not feel that we were in a position to complete on the sale quickly enough.
Raised her expectations
I remember telling my wife we should throw in the towel and hold off on buying another home when she uttered the damning words, that I had "raised her expectations".
Game on!
I am the type of man that loves a good challenge, and after my wife's comment, I went into analysis mode again but with far more motivation and vim. From there, I found a detached house within a nice area and close to family. The property was listed £40,000 higher than our affordability, but I thought let us go and see it anyway.
My wife saw the vision, and we ran with it.
We attended the viewing and thought "this was it"! The garden was reasonably big; it had three bedrooms with one en-suite, a bathroom and downstairs toilet. The property developer in me was excited to see a garage as part of the property which could one day be converted into a bedroom to make the property a four-bedroom HMO if we decided to move in the future. My wife saw the vision, and we ran with it.
We submitted an offer at a price that we could afford, which was rejected by the vendor. At that point, I was done and was reserved to concede that we should wait for two years to buy the next house.
Two weeks after receiving a rejection of our offer, I received a call from the agent saying that the vendor will sell at a price that works for us as they were now desperate. We pounced on the opportunity and commenced the purchase process. We used the agents recommended financial advisor to get things moving quickly.
What happened next...
The mortgage in principle for the new house was approved by factoring in both of our salaries and expenses. However, there were challenges with the BTL mortgage that almost killed the deal. As mentioned above, our financial advisor found an 80% LTV mortgage product for the buy to let, but we still had a looming question over whether we would get the valuation we wanted to pull money from our flat. A valuer from L&G came to our home and valued the property, and we were able to get the rental and capital value we needed to move forward. We now had our full deposit (from savings and equity) and the stamp duty required.
Without the determination of our financial advisor (see contact below), the motivation of the seller, pushiness of the estate agent, the chance encounter with Uncle C and the grace of God, all this would not have happened.
We followed the same process of due-diligence that we carried out when we bought the first property. It was late September 2018, and to our great pleasure, the transaction completed. We were able to pull it off, starting from a simple dream that we had to buy a second house.
What does it mean to port your mortgage?
Did you know that if you are already in a fixed term mortgage, you can move your existing residential mortgage balance and interest rate to a new property through a process called porting. I loosely understood the process, but my bank and financial advisor made the process crystal clear to me.
Our mortgage provider agreed in principle that we could port our mortgage from our apartment to a new home. The buy-to-let mortgage will then cover the flat. Please see the below breakdown:
Property value: £365,000
10% deposit: £36,500
Mortgage required less 10% deposit: £328,500
Ported mortgage amount from flat: £143,000 (same interest rate)
Balance (additional lending requirement): £185,550 (new interest rate)
The porting process will mean that you will have two mortgages on one property. For more details on the porting, please click here. The porting process saved us a lot of money on early repayment fees.
You will need to consult your mortgage provider to see if porting is possible.
Finally, some quick maths
Numbers on flat
New Valuation £210,000.00
Original outstanding mortgage amount £143,798.24
BTL mortgage @ 80% LTV £168,000.00
Release in Equity £24,201.76
Numbers on the new house.
Property £365,000.00
Stamp Duty £19,200.00
Deposit (%) £36,500 (10%)
Legal/ Valuation fees £2,287.28
Total (Savings and equity) £57,987.38 (£2k higher than I initially anticipated)
Beyond the purchase and the horrors
On my way to my brother's house late one evening, I had a panic attack, and for that split second, I had forgotten where I was.
The whole process took a massive toll on me, and I was under so much pressure after what was, one of the most eventful three months of my life. We then had to move out from our flat; my wife was heavily pregnant, we had to apply for property licensing (to be discussed in a future post), find a new tenant and do some minor alterations to our new place. To top it all off, I was about to start a new job in conjunction with our move and I was keen to work towards becoming a qualified surveyor. I was mentally and physically exhausted.
On my way to my brother's house late one evening, I had a panic attack, and for that split second, I had forgotten where I was. The panic attack only lasted two seconds, and I took it as my mind and body telling me to slow down. I had never experienced anything like this, and this particular period was one of firsts. I was becoming a first-time father and a first-time landlord. I guess all the stress was birthed out of our desire to raise our child in a better environment and to have more space.
Know when to shut down and recharge
I felt it was important to highlight this experience as there are so many of us who want to keep pushing ahead but may not consider the toll this has on our mental and physical well-being. Know when to shut down and recharge because if you do not, your body may force you to.
The key lessons and the moral of the story...
Explore all options before giving up.
Even if you do give up, be ready to pick yourself and march into the battlefield again.
Push yourself but not to the point you're at the edge of a cliff.
Put forward offers that you can afford on properties that may be a bit above your budget. You never know, your offer may just be accepted.
Find a financial advisor who compliments your work-ethic
Keep going no matter what
Our story and circumstances may not be dissimilar to yours as we came from humble beginnings. We share our experiences not to brag or boast but rather to fan the fire of others who wish to embark on a similar property journey. We hope that you are encouraged to go for it but act sensibly.
On a final note, the moral of the story is to "keep going no matter what", as said by the late American Billionaire Reginald Lewis.
Please see our financial advisor's contact details :
Michael Philpot Cert CII (MP) IMC, Financial Adviser, Direct Line: 0207 429 0322, http://www.financialadvisers4u.com. He is the best financial advisor we have worked with.
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Mo fe dupe ni owo olorun fun ore mi