Let to Buy for New Property Purchase
Answered on 15 January 2019 by Nick Morrey
We would like to rent out our current property. We still have a mortgage outstanding but want to purchase a new property, is this feasible to do?
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. If you are thinking of letting your house on a permanent basis then you will need to switch to a buy-to-let mortgage. Your existing mortgage lender will usually only give consent to let if you intend to move back in the foreseeable future. It would be worth asking your lender what their stance is because your current interest rate is very likely to be cheaper than you will get on a buy-to-let.
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. For more information on Buy to Let mortgages, please see our guide.
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.
There are very few buy-to-let mortgages available at high loan-to-values (LTV) and you will probably be restricted to borrowing around 75% of the property value.
You will also need to take advice on the best method of repaying any BTL mortgage. Whether you choose a capital and interest mortgage or interest only mortgage. Whether you choose a fixed rate or variable rate. The term you choose to repay the mortgage over. All these things will have an effect on you monthly repayments and how protected you are against future interest rate rises and I strongly recommend you seek the independent mortgage advice – you can call us on 0344 346 3672.
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.