Let to Buy

Posted on 31 January 2011 by Sam


My husband and I own a small house in London, mortgage free, valued at £400,000 (for the sake of clarity, let's call this house 1).  We are thinking of moving to a bigger property (house 2). Would it be possible to get a mortgage on house 1 for £200,000 and use this amount as a deposit for house 2?  We would still need a mortgage (linked to our salaries) to be able to afford house 2. House 1 would be rented out and the rent would cover the mortgage payment, does this mean that we need to do a buy to let mortgage on house 1 and a "standard" mortgage on house 2?

Sam,

You have correctly identified the situation and would be looking at a buy to let mortgage on house 1 and a standard residential mortgage on house 2.

The buy to let mortgage will be assessed against the anticipated rental income and this rather than your incomes will decide how much you can borrow whereas the residential mortgage will be assessed against your earned income. The Buy to Let Lenders will still want to check your incomes to make sure that you can afford to cover any periods when there is no rental income and any maintenance or repairs the property may need in the future. The residential Lenders will also want to know how much you are borrowing on the Buy to Let mortgage and what your rental income is so that they can also be happy that you can afford both mortgages.

I recommend that you speak to an independent mortgage adviser about your plans and the mortgage options available to you. It may be that you end up with 2 different Lenders or that 1 Lender will be able to satisfy both mortgages?

Peter

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