Posted on 24 October 2013 by Paul
I own a property worth £115,000 with a mortgage of £44,000 and want to rent out this property, then buy a new one worth about £80,000 is this possible to do?
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 funds 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 the mortgage to £86,250, which after settling the current loan of £44,000 would give you £42,250 to put towards the deposit on the new property. The loan can also 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%).
Simultaneously 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 market for both mortgages, rather than just one lender to do both. The only area that lenders may query is that the property you are looking to move to is significantly cheaper than your current home, and they may request some clarification around this point.
If this sounds of interest to you, then please let me know when you are available, and I'll arrange for you to speak in more detail to one of our consultants.
More than mortgages, talk to me about:
Financial Protection | Investments | Personal and Corporate Pensions | Home Insurance
General Insurance | Valuations | Conveyancing | Wills | Home finders
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.