When you already have one mortgage in your name, buying a second property can be a bit of a challenge. You'll have to be extra sure you have the money in your budget to make both mortgage payments, and you'll also need to find a bank that's willing to lend you the money with your current debt-to-income ratio. But while this is challenging, buying a second property when you already own a first is not impossible. Follow these tips for success.
Seek mortgage approval before you start shopping.
Getting approved for a second mortgage is going to be more challenging than getting approved for the first. This is because when you already hold one mortgage, your debt-to-income ratio is going to be higher. So some banks may not be willing to lend to you at all while others may lend you only a limited amount of money. The only real way to know how much of a struggle this is going to be is to start shopping around for a loan. Doing this before you actually start hunting for specific properties keeps you from getting emotionally attached to a place you later find out you can't afford.
If you get approved for a mortgage that you feel will cover the type of property you want to buy, then great. If not, you'll need to re-visit whether buying a second property is really a good idea. If you're set on this goal, you may want to try increasing your income.
Increase your income.
Increasing your income will decrease your debt-to-income ratio, which will make banks more willing to lend to you—and to lend you more. Look around at other employers in your area and start applying for jobs that pay a bit more than you're earning now. If you've been in your current position for a while and have not yet received a raise, ask for one. You could also think of taking on a side gig. Something simple like working in the local library on the weekends or teaching a night class at the local community college may nudge your income up enough to make you more appealing to lenders.
In addition to the tips above, be sure to sit down and carefully plan out your budget, taking into account the second mortgage. Make sure you'll have enough wiggle room that you won't be doing without groceries or struggling to make payments each month. If everything fits financially, then you're ready to start shopping. Find that dream property for sale and make an offer.