Posted on 5 April 2014 by Shane
Hi, I'm interested in buying a house to rent out, I currently have a mortgage of 75,000 on a house that's is valued at 120.000. What I would like to know is firstly am I in a position to do this, if so what is the process ie. do I have to remortgage to get a deposit or is the deposit borrowed against the value of my current home? What is the process once I have found a house on the market that meet my requirements? Is it true that all fees are higher? I really have no idea how this all works, I have asked many people but end up again with no idea. I literally need a step by step walk through from start to finish.
What you are looking to do is similar to a "Let To Buy", whereby you capital raise on your existing home, to then use the funds as a deposit on the new "Buy To Let" property.
Each lender tends to have a different cap on the borrowing for your current property which is between 75% - 85% of the value, which means that we could raise the mortgage to between £90,000 to £102,000, which after settling the current loan of £75,000 would give you £15,000 - £27,000 to put towards the deposit on the new rental property.
We would then look to apply for a Buy To Let loan for the new investment property, bearing in mind that most lenders go up to 75% of the purchase price. The loan can also sometimes be restricted by the level of rental income received, with lenders typically looking for the rent to be a minimum of 125% of the monthly payment at either the pay rate or a notional rate (say 5%).
You are correct, that the fees for Buy To Let mortgages are more expensive than the ones for residential loans, and this is something that we would factor as part of the process, when looking at which are the best deals for your circumstances.
If this sounds of interest to you, then please contact one of our consultants on 0344 346 3672 and they'll be able to give you more details on how we can help.
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