We are moving north and wish to keep our london property to rent. The property we currently own is valued at around £250,000 to £260,000 and we still owe £197,000. The new loan size will be around £150,000 with a deposit of £7,500.
Also, the property we are buying is valued at £175,000, can the extra equity be counted towards the new loan? We only have 5% deposit, but the loan to value of the house is approx 85%.
Taking your existing property first your current loan represents 79% of the property value and at this level it should be possible to convert this to a Buy to Let mortgage. You should first ask your existing Lender if they will give you permission to let as this could mean you keep your residential mortgage rate and avoid any nasty early repayment charges that may apply. If they are not willing to grant you consent then you will need to look at remortgaging on to a Buy to Let mortgage. The rates are likely to be slightly higher and there can be substantial arrangement fees to pay, especially if you need to keep the mortgage payments down by taking a low interest rate. Prior to exploring the BTL market you should ask several local letting agents to give you an estimate of how much rent you can expect to receive on a monthly basis. As a rough guide this should cover around 125 - 130% of the proposed mortgage payments.
I am a little confused regarding your new purchase as a mortgage of £150,000 on a property worth £175,000 represents 85% LTV. If you have £7,500 saved where is the remaining deposit coming from? However, subject to your personal circumstances and getting either consent to let or a Buy to Let mortgage offer, I do not expect you to have trouble obtaining a new residential mortgage.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to offer further advice on your situation.
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