I am new here and new to property development, I'm 22 and a qualified quantity surveyor looking to start young and move into the property market, however I would really appreciate advise from you guys!
I own a property valued at approximately £120k in the current market, with total borrowings of £96k, therefore £24k equity.
My question is can I use this equity as a deposit (or will the lender accept equity as assurance)on a new property? My plan is to purchase a terrace house requiring work for say £60k using the equity as a deposit, spend say £3k on it, rent out and then do the same again using the equity from the new property.All sounds good in theory but I would really appreciate your advise as to how easy and realistic this is, and also what the main shortfalls/risks are?
Thanks.
Hey D Wheeler
At the moment your showing 20% equity in the property you own.
I gather your from the UK based on the dollars your showing.If this is the case I dont know the leading % over there based on deposit requied for Property..
If your looking at $63k for the new place it would be best to work of the 80/20 rule(20% deposit)
This being the case you would need about $13k plus buying costs.
You can use the equity as assurance in your current place if you have enough.
At the moment only having around 20% in your current house you have nothing to play with.
A bank may lend up to 85% val of existing meaning you could pull $6k out of th existing house, but that still isnt enough.On the risk and shortfalls"""
there isnt much if you have good knowledge in what you are buying.
Its all about reseach and knowledge to ensure you cover everything.
cheers JI think you would have to compare terms to see which is more favorable. Lenders tend to treat investment properties differently than primary residences. You would have to find out the specifics.
If option 2 has better terms, I don't see what prevents you from going for it. When you refinance a primary residence, you wouldn't expect to face a lot of questions about what you intend to do with the money. I expect that wouldn't be of concern to the lender.
I think you should make it a shot. As far as you rent a house you get capital for a new one. This is a very good way for doing business. I do not find any problem in it. Good idea.
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