Is possible to do a 'Let To Buy'?

Posted on 11 February 2014 by Steven


Is possible to do a 'Let To Buy'?

Hi, I've got residential mortgage of £200k on a property worth £365k. Is it possible to release some equity from this mortgage to use as deposit on the second home. I will live in the new property and rent out my current place on an interest only basis? Thanks, Steven

Steven,

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 £273,750, which after settling the current loan of £200,000 would give you £73,750 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%), so we would need to find out how much the current home will rent for.

At the same time we would then arrange a main residence mortgage 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 for both mortgages, rather than one lender to do both.

If you would like to discuss this in more detail then please contact one of our mortgage experts on 0844 3463 706.

Regards,

Alistair

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