Could we buy-to-let our property, pay off our debts and still rent another house?

Posted on 5 March 2008

We have a 2 bed flat on the market at £225,000. We have an interest only mortgage and need to pay back £161,000. We were looking to sell the property to pay off our other loans & credit cards (approx £23,000), invest some in a business venture and put a little aside and rent a house. At the moment we are getting lots of viewings but no offers yet. With our fixed term up in April, I am now wondering if we could buy-to-let our property, pay off our debts and still rent another house, whilst we look at maybe raising/saving funds for our business venture at the same time. How does the maths work out? Our joint monthly income after tax is £2,500.

Thanks

Hi Simon,

To Buy-to-let, your own income is not as relevant as the rental income.  You can, in short, borrow up to 85% of the property value, (in your case £191,250) as long as the rental income is more than the mortgage payments. (some lenders stipulate by a margin of 10 or 20%)

This would give you £191,250 - £23,000 for debts = £168,250.    So this is very tight, and unless you achieve the full rental income for your property (it would need to be around £1,050 per month) you will only just make it.

In terms of selling the property instead, (which will free up the other £33,750 equity that buying to let required you to leave there) you may find that your price is too high for the current market, and that you would need to reduce it for a quick sale.

Best of luck.

Category: Buy-to-let

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