How can we rent our current home out, and buy a new home?

Posted on 7 March 2013 by Rachel


I own a flat roof terraced property that has been valued at £500,000, with a mortgage of £336,000 in its current condition. We are speaking to architects about building a garden room and terrace on the flat roof, which will not be a problem because all the other buildings around us are a storey higher. If we do this the property will be worth £600-650,000. I would like to purchase a second home to use as our family home, closer to a good school and and rent out this property as an investment for my retirement. If I rent it out after the conversion, it will obtain £650-700 a week or £500 a week as it stands.

All my savings £20k would go into the roof conversion, which would leave me no money to put down as a deposit on our second home. I'm also now a parent and not working, so my self employed husband and I have nowhere near the income needed to have to get a second standard mortgage for the £350,000 we would need to buy a second home. Alternatively, we could leave London and buy a property for much leas at £200,000 or less, but I'm not keen on this really.

Given the equity I have in my current property, the investment potential, and my wish to have a buy to let, what would you advise in terms of achieving my goal outlined above. We currently have an interest only mortgage and if we borrow any more money from our current lender we would have to obtain a repayment mortgage, which I'm not too keen on. Many thanks.

Rachel,

This is a really tricky case to try and place. Without knowing a lot more information there's not a lot I can really say in terms of whether or not this is possible to do. It may be possibe to take out a second charge loan to help finance the garden room and terrace, though it's more likely to require some type of development finance. If it is only going to cost the £20,000 you have in savings, then onec the work is completed we could look at doing a 'Let To Buy' mortgage on the property to capital raise to provide a depsoit for your new home. Typically we could look at 75% of the increased value. The really vital question is how much income you and your husband have to be able to support the new mortgage?

I think this is something that could be done, but we do need more info before I can say for sure.

If you'd like to find out more, then please let me know and I'll arrange a convenient time for you to talk to one of our consultants.

Regards,

Simon

simon.collins@johncharcol.co.uk

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