Posted on 17 September 2012 by Danielle
me and my husband own a property outright worth 240000, we would like to move to a different area and have found a property to buy for 335000, we are having difficulty finding a buyer for our property so are now wanting to let the property out, we have a residential mortgage agreed for 96000 on the new property and would like to release around 170-175k on our existing peoperty to go towards the new purchase, is this viable?
Is this viable? A very good question and whilst in theory what you are proposing is possible, in practice in may not be.
This is all going to depend on how much rent you will receive on a monthly basis and this will be determined by the property's location, type and the local demand for rented properties. You should start by asking 3 independent letting agents to give you a quotation including the anticipated monthly rental and what they would charge to manage the property for you.
The monthly rental figure is going to need to cover any mortgage payments by at least 125%. Assuming an interest rate of 5% a loan of £175,000 would cost £730 per month interest only and your rental would need to be £912.50. The reason for this to enable you to build up a reserve to cover the management of the property, any unexpected maintenance or repairs and to cover any periods when the property is not let.
If you have not been a landlord before I recommend that you read the following guide produced by the specialist Buy to Let lender BM Solutions:
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right mortgage for your situation.
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.