No Deposit

Answered on 19 March 2019 by Nick Morrey

I'm mortgage free, my house is worth about £135,000. I would like to rent my current house out, and buy a bigger place but have no deposit. Could I buy another place or do I need a deposit? Thank you in advance for the advice.

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 a mortgage to £101,250, which you would then 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%).

At the same time we would then arrange a main residence mortgage for you 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 you'd like to discuss your options in more detail, then please contact one of our consultants on 0344 346 3672 and they'll be able to give you a clearer idea of how we can help.

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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