Let to Buy

Posted on 11 February 2011 by Gyda Charles


I own a flat in Hackney worth approx. £200,000 and wish to move out of London now I have a daughter. I would prefer to keep hold of my flat by putting it on the rental market and using it to finance the purchase of a 2nd property. I have no idea how to go about this or it would make financial sense. How much capital can I expect to release?

Gyda,

This is a perfectly feasible idea and will leave you with two mortgages. A Buy to Let (BTL) mortgage on your existing property and a residential mortgage on the new property.

Usually you would put the equity from the sale of your property down as a deposit on the new one, but in this scenario you would need to release some of your equity by borrowing more against your current home. The amount that you can release will depend on the anticipated rental income, the size of your current mortgage and it's value. Based on a value of £200,000 the maximum total borrowing would be in the region of £170,000. Out of this you will also need to repay you existing mortgage and cover the costs of moving.

The BTL mortgage will be assessed against the rental income, a local ARLA registered Estate Agent can help you with this, 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 BTL 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 BTL mortgage and what your rental income is so that they can also be happy that you can afford both mortgages.

I believe you would benefit from speaking to one of our independent mortgage advisers. Please call on 0344 346 3672 and tell the adviser the date of your question, they will be able to look at your situation and take it from there.

Peter

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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