Is a Buy to Let mortgage viable?

Posted on 5 September 2012 by Alistair

Is a Buy to Let mortgage viable?

We are seeking guidance on releasing equity from our current property. This is required as I am having to relocate with the company I work for.

After much discussion we have decided to rent out our property and buy a second property closer to the office.

Our current house is valued at £174,000 (based on the fallen through sale) and we have £86,400 of equity.

We would look to release £35,000 as a deposit on new property valued at £165,000. Our current mortgage company will not  allow a secured loan with a 'consent to let' leaving us with BTL as our option.

Our agent is marketing the property at £600 pm. We should be able to find a tenant within 6 weeks.

Can you provide guidance on whether the BTL is viable? The timing and how the process might work as we would like to attempt to port our current mortgage on BOE +.99% (with top-up). Or alternatively can we apply for two mortgages, the BTL and the residential, simultaneously? On last check our credit score was good.


I think a buy to let (BTL) is viable based on the figures you have given.  If we say your current property is valued at £170,000 for mortgage purposes I calculate that you will need a new mortgage of around £122,600 to repay your existing debt and raise a deposit of £35,000.  The figures are quite tight because typically lenders are looking for the monthly rent to cover the monthly interest payments by a margin of 125% and you would just be in the higher interest rates applying to loans up to 75% of the property value.  If you could restrict the loan to 70% LTV then the rate payable would come down and you would have a wider choice of lenders.

With regards to your existing mortgage I can quite understand why you would not want to lose the rate you are paying,  Bank base rate plus 0.99% would be impossible to replace.  The procedure for porting your mortgage is just like taking out a new mortgage with the same lender, the only difference being that you wish to carry forward your existing loan on the same terms and conditions.  You should check that it is portable and that you will not be liable to any early repayment charges.  Any additional lending will be at current market rates.  This can be applied for at the same time as the BTL mortgage.

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 BTL mortgage for your situation and help you with the application to port your existing residential mortgage.


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.

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