Posted on 8 August 2011 by Karen
Hi, we have a mortgage on our residential home for £174,000 its worth approx £250,000 we also own outright a flat that we rent out valued at approx £65,000. We are thinking of moving area, and want to sell our main home, and buy another property, and wondered if we could release capital from our flat to use to put towards buying another property, because we wont have enough equity in our house to be able to afford a new property in the price bracket we would like. Our annual income is approx £55,000.
It should certainly be possible to raise capital using your flat as security and rather than your income it will be the amount of monthly rental you receive which will determine how much you can borrow. Depending on the rental and how much you need to put aside for fees and other costs you can expect to be able to release up to 85% of the property value. It is however, more likely that you will actually have to settle for 80% because of the strict market conditions that exist at present.
As the mortgage on the flat will be based on your rental income your earned income will only need to cover the borrowing for your new residence and the combination of equity and released capital will give you around £127,000 to put down as deposit and cover the costs of moving house.
I believe we can help you with both transactions 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 offer further advice based on 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.