Equity to buy new home

Answered on 24 September 2018

We own our property outright, worth £375k. We also remortgaged our existing property for £65k which was used to buy half of my parents house when they died, which we now rent out (rental per month £900) and property value £185,000. We would like to move home and have found something for £600k. Is it possible to keep our existing property and rent it out for approx. £1400-£1500 per month and then use the equity to purchase the new property for £600k or do you think we would need to sell our existing property. Our joint salaries are approx.£83k. Thanks, Lisa.

Hi Lisa,

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 £281,250, which you would then use towards the deposit on the new property at £600,000. 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%), which would be almost spot on the rent you are likely to receive. 

At the same time we would then arrange a main residence mortgage for the balance of the purchase price for your new home, which, subject to knowing more about your overall financial position looks very possible.

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 me know when you are available, and I'll arrange for you to speak in more detail to one of our consultants.

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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