Raising Money to Let Property

Answered on 26 August 2015 by Nick Morrey

Hi, I purchased my flat 2 yrs ago valued £110k and now owe roughly £55k on the mortgage.  I want to release money to purchase a bigger property with my partner and let out the flat.  My current mortgage is £310 each month and I could get rental of £624per month for the flat. Help.

What you are looking to do is known as a "let to buy", whereby you capital raise on your existing property at the same time as moving it onto to a buy-to-let basis. You then use the funds raised as the deposit for your new main residence.

Typically most lenders cap the borrowing on your current property at 75% of the value (though there are a few who do go higher), which means that we could raise the mortgage to £82,500, which after settling the current loan of £55,000 would give you £27,500 to put towards the deposit on the new property. The loan can also sometimes be restricted by the level of rental income received, with lenders typically looking for the rent to be a minimum of 125% of the monthly payment at either the pay rate or a notional rate (say 5%). Either way in your case there seems to be easily enough rent to cover this.

At the same time we would then arrange a main residence mortgage for you & your partner for your new home. One of the real plus points of 'let to buy' is that we can choose from the whole of the mortgage for both mortgages, rather than one lender to do both.

If this sounds of interest to you, then please let us know on 0344 346 3672.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.


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