Can I let my house to move elsewhere?

Posted on 29 April 2008

Hi Katie,
My partner and I currently have a joint mortgage with Nationwide. Our property is worth approximately £200K. The outstanding balance is we owe is £130K. Our total take home salaries amount to £60K.

My partner's company has asked him to relocate. Ideally we would like to transfer the mortgage on our current house to a one that allows us to rent the property out, and if possible take the equity from our current property to help us buy a new home. Is this possible? If so how do we work out how much we can borrow to purchase the a new home?

Many thanks for your advice.
Cheryl 

 

Hi Cheryl, yes you simply remortgage your current place to a buy-to-let (except when you are doing it this way round it is called a let-to-buy) and raise a little extra money in the process to use as the deposit for your next home.   The amount you can remortgage is based on the rental income of the house.   The most you can take the mortgage up to is 85%.  If you can keep it down to 75% or 80% you will have a lot more lenders to choose from to find the best deal.

Generally speaking, the rent needs to cover the mortgage payments by 125%.  Don’t forget that when you remortgage you will have a different interest rate, and you might also need to restructure your repayments, depending on whether you want to go interest only or not.    

80% of £200,000 is £160,000, which would give you £30,000 to use as a deposit.  As your joint income is a healthy £60,000 you could probably borrow £225,000 as your new residential mortgage, giving you a total new purchase price of £255,000.

Of course this is assuming that your rental income would be 125% of the mortgage payments on 160k.  Guessing a rate of about 6%, on 160k that would be mortgage payments of £800, so you’d need to be getting about £1,000 rent.

 

 

Categories: Buy-to-let, Let-to-buy

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