remortgage, self cert, buy to let ???????

savemesomedollar

I'm looking for some advise with regards to purchasing/funding another property.

I have a mortgage on my property for £40,000 for 17 years. It's worth around £100,000 now, so with the equity of £60,000 and a extra loan of around £25,000 I was hoping to purchase another property and let it out. I don't know what the best way around this would be. Do I extend with my own mortgage, get a buy to let mortgage, or a interest only mortgage.

Can anyone help please?

HelpWhereIcan

Depends on your income, any early repayment charges you may have on your current mortgage and the amount of rent you can expect to receive on the new property plus a myriad of other factors.

A common way would be to remortgage your current property to get access to some of the equity (probably up to 50k on top of your current mortgage is the max with most lenders), and then to use the cash raised to act as the deposit for one or more properties bought using a buy to let mortgage.

With a buy to let mortgage, the lender will generally look for a deposit of 15% of the property's purchase price and for the rental income you could receive to be enough to cover the mortgage plus a bit more (normally 125% of the mortgage payment). As you can guess, Raising 50k would give you the deposit for more than just one property at £75k.

Most buy to let mortgages are set up on an interest only basis to minimise your contractual payment. There are some that have flexible features and would allow you to over pay if you wanted to start repaying some of the money borrowed.

We do not have enough info to give detailed advice and the area will need quite a lot of explanation so I would suggest that you talk to a whole of market broker to make sure that you get a full explanation of all your options.

Hope this helps

AndrewSmith

In my own personal experience of Buy to Let it is better to get the maximum mortgage possible on the property you intend to let out (subject to the approval of the lender etc) as the mortgage payments to a buy to let mortgage can be offset against any potential income tax liability on the rental income.

If you were to purchase the buy to let with a smaller mortgage you may find that you have to pay tax on some or all of the remaining rental income.

Andy