I would like to know if a Let-to-Buy scheme would work for us. I own my property outright here in London (NW2), recently valued by estate agents between £600k and £700k. We need to move and would like to buy a new house for about £650k. My yearly income is £40k, plus £18k for my wife. We have funds for a £50k deposit on the new house, so we only need to cover £600k for the new property. We have been told by local estate agents that our current house would earn a rent of about £1,700 per month. I am 52, so I am unlikely to be given a 25 mortgage on the new property, I assume. My partner is 42. I am interested in your input. I would appreciate a word also about how long setting it all up could take, as time is also a concern, as we would like to start searching for houses as soon as possible.
It may certainly be possible to do a "Let To Buy", capital raising on your existing property at the same time as moving it onto to a Buy To Let basis, and then using the funds raised as the deposit for your new main residence.
Typically most lenders cap the borrowing on your current property at 75% of the value (though there are a few who do go higher), however the actual loan size is also dependent on 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%). With rent of around £1,700pcm this would effectively cap the loan at approx £326,000.
At the same time we would then look to arrange a main residence mortgage for you & your partner for your new home. With a joint income of £58,000 to get the rest of the funds needed on a residential, this is likely to be at the top end of what lenders would be prepared to look at offering you, particularly in light of the new affordability / stress test rules that the "Mortgage Market Review" introduced on the 26th April.
One of the real plus points of 'Let To Buy' is that we can choose from the whole of the mortgage for both mortgages, rather than one lender to do both, and we can apply for both simultaneuosly, though uusally it's best to get the Let to Buy remortgage up and running on you current home as soon as possible.
I think it would be worth exploring your options in a bit more detail, and you can do this by contacting one of our consultants on 0344 346 3672 and they'll be able to give you a more in depth idea of how we can help you get the new home you want.
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