Posted on 22 May 2010 by Wendy
We currently live in a flat worth around £95/100k, our mortgage is £63k and we were wondering if it would be possible to change our flat to but to let and buy a house around £130k?
Whilst it would be possible to convert your existing mortgage into a Buy to Let mortgage, either with your existing Lender or by remortgaging to a new one, you need to consider where the deposit for your new property will come from.
If you are thinking of raising this on your flat, then the maximum you will be able to raise is 80% of it's value i.e. between £13- £17,000. This would result in you paying both a large fee and a high interest rate on the Buy to Let mortgage and would also be dependent on the rental income supporting the loan you require. It would also mean that on a purchase of £130,000 you would be borrowing up to 90% of it's value and again the interest rates payable on a residential mortgage would be higher than if you put in a greater deposit.
You need to consider very carefully whether it is going to be worth keeping your flat on this basis and I recommend you speak to an independent mortgage broker. They will be able to compare the rates and costs involved with either keeping or selling your flat.
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.