capital raise on our unencumbered home

Posted on 21 August 2017 by Tony

Hi, we have a property which we own outright circa £210,000. We would like to know if its possible to obtain a mortgage for a property that we'd like to move to circa £310,000 using our paid for property as collateral and indeed renting this property out to pay mortgage on second home as mentioned?

Hi Tony,

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 monies 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 £157,500, which would then be put towards the deposit on the new property. The loan size can 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%), and we would need to know the likely rent the property would generate and take this into consideration.

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 this sounds of interest to you, then please let me know when would be a good time for you, 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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