Useing house as collatteral

Yes. The process is known colloquially as 'moving house'. People are doing it all the time.

YO HO HO Santa Frisby.....fair play, should have read, what is the bes way to use this equity to buy a 2nd propert

Not a very helpful reply.

I don't think they want to move. I think they want to borrow against their existing property and buy an extra house. They are wondering how much they can borrow, given their low earnings compared to the equity in their house.

In the meantime, the OP needs to research equity release and buy-to-let mortgages, if that is what he is interested in doing. Hopefully, an expert will be along in a moment.

He also needs to think rather carefully about whether house prices can keep on rising.

Why do you want to buy a second property?

All the income from the property and quite a lot of your income is going to go on paying the mortgage for the next 25 years.

At the end of that you will have a CGT bill if you sell the property if prices continue to rise.

If property prices fall things can be even worse, especially as you don't have enough other income to ride it out if interest rates shoot up and the rent won't cover the mortgage (which it almost certainly won't even today if the property is 100% funded by borrowing however that borrowing is secured.)

Tim.

I take the point. It was probably a little flippant, and certainly not so clever once I reread the thread title!

But really, it was intended to be slightly provocative, in that it seemed as though the OP (like many others perhaps) is viewing this thing called 'equity' as a lump of accessible capital which isn't already being utilised. It *is*: he's living in it.

If he understands that he is merely wishing to borrow money, and to borrow it cheaply by offering security to the lender, the why does it particularly need to be the *existing* property, rather than the new one, that he offers as security?

It would certainly be useful to have some more details.

Ah, I *see*. (Yes, I am faking it - I'm relieved you took it in the spirit intended.)

I don't wish to sound unhelpful here, but it seems to me that this 'equity' is already being used in the form of your continued enjoyment of the property that you are living in.

It sounds as though you wish to borrow some money for the purpose of buying some property. Nothing wrong with that, of course, and you can certainly offer your considerable existing assets as security to a lender in exchange for a cheaper loan. I'm sure that you understand the risks that entails. But you could just as well offer the new property as security.

But security isn't the only think that a responsible lender would consider. They will normally also assess your ability to service the loan (i.e. pay the interest on it) from your income.

Is it your intention to generate income from the second property (i.e. let it out)?

It seems to me that your current 'equity' is a bit of a red herring, but then I've never found it to be particularly useful concept in any case. Other opinions may differ.

I haven't mentioned specialised products such as home reversion schemes (which do, on the face of it, let you have your cake and eat it - though there is really no free lunch) because, in practice, you are not really old enough to be a potential customer for these (as I understand it).

I'll qualify that: I suppose that if the second property has significantly less value than your existing property, then offering the existing property as security might represent a better proposition to a lender, and hence potentially a cheaper loan. You could always put both of them up as security! Remember that any increase in security for a lender means less 'security' for you.

Personally, I wouldn't be prepared to risk further exposure to property at the moment, even if I could afford to. But we don't really know what your motivation is. Beware of jumping on a bandwagon which is long overdue for its servicing!