Buy to let?

matmad

Hi all,

We've outgrown our 2 bedroom maisonette in South London, and want to move to the coast within the next 18 months. The maisonette is worth about £150k and we have £23k left on the mortgage. Our income is about £40kpa. I think we could probably get £700 per month by renting out the maisonette.

My question is: Any ideas about how much a buy to let mortgage might give us to buy the house by the coast?

Haven't got a clue about any of this, but the maisonette seems too good to give up, even though we can barely squeeze into it these days!

Any help gratefully received!

Cheers,
Julie

Barney088

Hi,

You'd get about £100K to £120K on you home in London, provided your income is over £20K (which it is) most lenders would only use the rental income to service the mortgage in London. THis would give you cash to buy a property on the coast of about £60 to £80K.

However, if you are still going to be earning then you can use this as a deposit on a property on the coast and get a mortgage on top. The world is your oyster and there are many options you can follow. Income of £40K would give you mortgage of £130K or more, property therefore of £200K.

silvercar

You can get buy to let mortgages of 85% of the property value, provided the rental income covers the mortgage interest by 130%. On your figures you could get a mortgage of about £125,000 on your maisonette. This means you could take about £100k out of the maisonette (based on your remaining mortgage) to use to buy a property on the coast.

For your new home £100k released from the maisonette plus a mortgage of about £120k based on 3 x your salaries = £220k property.

Just some ideas, it seems sensible (and tax efficient) to have the buy to let mortgage on the property your renting out, that way your mortgage interest is put against your rental income to reduce your tax bill.

These figures are all based on what main stream lenders are happy to give. You need to be happy taking on these commitments.

AndrewSmith

Excellent advice from Silvercar, as usual

Also remember that with the buy to let mortgage take full advantage of 'independant taxation' by having the loan in both you and your spouse / partner's name if this is applicable.

This will allow you to fully utilise both of your lower rate tax bands and avoid un-necessary taxation payments.

Andy

matmad

Ok guys, sounds like great advice.

However, being a total newbie to all this stuff, I need to get it straightened out in my head. So............

1. Get a buy to let mortgage on the maisonette of 85% of its market value, minus the remainder of the current mortgage, giving approx £100k. Then the monthly rental income from this property should be enough to pay off this mortgage.

2. Use the £100k from above as a deposit on the new home and take out another mortgate for say, £100k to buy this one.

Meaning we would have two separate mortgages. Have I got it right?

Cheers,
Julie

AndrewSmith

Spot on Julie

Andy

matmad

Fabulous - thank you!

Julie