Advice please help!! - Renting current house and buying a new house

shangaijimmy

We currently live in a great 4 bed detached home, 3 years old on a new estate in a good area. Unfortunately my partner has had back surgery recently (2nd time) and we realsie that a house with 3 floors, 4 beds and 4 toilets is just to big. We would like to move into a bungalow and i need advice in how to finance this.

Obviously a sale would be the favourable but in the current climate this probably wont be an option. We have the possibiltiy of a 3 year rental option through my work connections, and this is something i am keen to explore.

Our house was recently valued for re-mortgage at £220,000 and we currently owe £160,000. We would be looking to buy somwething around the £150,000 - £170,000 region.

I've read about Let to Buy mortgages but can't seem to find any info on how much we would need to get for rent and even if this would be an option to us with our current level of equity, mortgage and possible purchase.

Can somebody start the ball rolling for us? I'd like to have an idea of it's workings before i start speaking to a broker!!

If this isn't an option, then is a buy to let? And what would be the steps?

Any advice would be greatly received as my head is in a pickle!!

poppy10_2

The rent will normally need to cover around 115-120% of the monthly mortgage payments.

herbiesjp

Based on the current mortgage and value you could get a BTL (assuming rental income is high enough)

However, do you have savings set aside in order to put down for the second purchase?

shangaijimmy

We should be able to raise a deposit but how much we need %-wise?

herbiesjp

Minimum 10%, as long as your income could support the 90% mortgage left

To be honest this is quite complex, and you would be better off speaking to a whole of market mortgage adviser, so that they could come back with options tailored to your own individual needs

bluekp

Hi,

I've recently looked into doing this myself (and in fact am now awaiting the underwriters verdict :eek:)

Anyway, we were told that we would be better getting a "consent to let" on the property we wish to rent out. This would allow us to remain on our current interest rate, rather than a "buy to let" mortgage which would incur product fees and a considerably higher interest rate.

With regards to the rental value, you would need to make at least 125% of the monthly mortgage payment as rent. ie, if mortgage payment was £1000pcm, you would need to be able to rent out for £1250pcm.

If your current mortgage won't support this, then you could consider changing to an "interest only" mortgage while you are renting out. This is what we have opted for as we only intend to rent our property out until the house prices have a chance to recover - then we will probably sell.

Hope this helps, and good luck!