If you have the need or objective of having more than one house, you have good options to buy it with a mortgage and with little money.
You can do it by combining both mortgages or getting rid of one to embark on the other.
You have to take into account other savings options, such as buying another home with little money and the tax factor.
It is a time in which it is increasingly difficult to buy a home, between salaries, economic and employment uncertainty, interest rates and the increasing demands of banks to grant a mortgage. However, out of necessity or investment, there are people who embark on not just one, but another home purchase already having a mortgage . What is the best way to do this?
If you find yourself in the situation of having a mortgaged house, you can buy another home if you meet the requirements demanded by the banking entities. You have various options that banks offer so that you can access your new home, even if you have a previous mortgage.
If you want to buy another house with an existing mortgage
The first option you have, if you can, is to get into two mortgages, buying another house while you are also paying the first one. Obviously, if you meet the requirements, it is a good investment, since you can rent it and with that profit pay that mortgage or even part of the first one. However, if you can afford it, then you don’t rent it and it is suitable as a home for your children to live in.
Second mortgage and double loan
Applying for a second mortgage for a new home is a straightforward but expensive option. Although the procedure is similar to the first time, the bank will be more strict. Showing solvency to pay the installments of both mortgages is crucial , since generally the bank covers only 60-70% of the value of the home.
Extension of the current mortgage
Extending the mortgage, known as novation, allows you to obtain more capital to purchase another home. However, you should carefully evaluate the new conditions, including the monthly payment and interest rate. The bank may refuse to modify the original contract.
Contracting a new mortgage
Accessing new financing to pay off the existing mortgage is another option. This requires a good income stream and entails additional expenses such as early termination fees and purchase and sale costs.
Sell with a mortgage and buy another home
In these cases, you do not combine both mortgages, but you come to a solution of combining both or finishing paying the first and focusing only on the second.
Keep the same mortgage when moving house
The novation of the loan with a mortgage guarantee allows you to transfer the current mortgage to a new home . The bank will evaluate whether the value of the new property can cover the outstanding debt.
Bridge mortgage or unification of the two mortgages
Applying for a bridge mortgage allows you to purchase a new home while you sell your current one. The bank offers a term for the sale and a mortgage loan with both properties as collateral . This option can be beneficial, but it carries risks if you are unable to sell the property in time.
Subrogation: transferring the mortgage to the new owner
Selling your property and transferring the mortgage to the new owner is a conservative solution. However, the bank will require the new buyer to demonstrate solvency and liquidity.
Keep in mind…
The process of obtaining a second mortgage is more rigorous, requiring a minimum income of 2,500 euros per month and significant savings for the initial payment. In addition, additional expenses represent approximately 12% of the value of the home , and the term for the new mortgage can be reduced to 25 years.