Hello, My partner and I have a 2 bed maisonette in North London (Crouch End, N8) which has been valued at approx £775,000. We have a mortgage on it of £375,000 (interest only). We need to move to a bigger house to accommodate our family but the average cost of a house in this area is now approx £1 - £1.4 million. I also own a property with my sister which has been valued at £420,000 and has a mortgage of £100,000 remaining. This is currently rented out at £1750 pcm. My question is, how can we raise the capital/ get a mortgage in order to be able to move on to our next home given our current situation. Would a let to buy mortgage be an option? I am told that our flat could command a rental income of at least £2500. We look forward to hearing your advice. Regards.
Without knowing the incomes of you and your partner, I'm a little limited as to what I can say, however I'm leaning more towards you selling your existing property to make the move happen. If we look at a Let To Buy, typically most lenders cap the borrowing at 75% of the current value which would be £581,250 based on the value of £775,000. However, the rental income is also taken into consideration, usually assessed at 125% of a notional rate of 5%, and based on £2,500per month this would leave us a little short.
We could also look to capital raise on the property that you own with your sister, as long as she's in agreement. She would also need to take independent legal advice, as she would be taking on an increased debt, to which she wouldn't be directly benefitting from and would need to be sure she understands the potential ramifications of this.
Assuming we could get the full £581,250 that would release around £206,250 from your current property, then if we had 75% of the shared property that would give us another £215,000 approx. Therefore if you are looking at property between £1million - £1.4million and can raise around £421,250 then taking stamp duty out, you'd need a mortgage around £628,750 - £1.04million.
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.
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