Want to let my property and buy a new one to live in...

Cash-Is-King

Hi Guys

I have a First Direct Offset mortgage (5.29% 4 years left on it) on my £115K mortgage - 19 years left on the mortgage.

The house would be realistically valued at £265K, although I think £270K+ could be a possibility.

We want to move to a bigger house, but we know our house would be a good 'renter' in this area and it has been good to us, so we don't want to cut it loose just yet and would prefer to rent it out.

I have had discussions with my IFA and he ran our salaries/outgoings and said we could raise £50K from the existing mortgage (maximum) to use for downpayment/refurb costs for the new house. This would bring the total mortgage to £165K, the monthly outgoings (interest only) would be in line with the monthly rent income, the rent income may be slightly larger.

We have spotted a house we like that is 'on' @ £250K and needs £30K thrown at it. I would hope to get it beneath the £250K as we wont be in a chain and we will have a cash deposit to put down on it (see above).

We also have approx £15K in savings too - we plan to keep this as a contingency fund for voids, repairs etc

I understand that starting into BTL is risky but if the worst comes to the worst we can always sell what is a very saleable property - but I feel that I wont be faced with this, but who knows? I will be prepared for it if it happens.

Now the advice that I am seeking from you guys:

1) Do I have to move my First Direct Offset Mortgage to the new property and start a new mortgage on what will be the rental property? Or does my new property have to have the 'buy to let' mortgage?

2) How do I get the ball rolling? Should I contact First Direct and lay my cards on the table or do I try and get the cash advance organised now?

Any other tips or advice would be VERY welcomed, we really want to make the right decision -


Thanks all!

silvercar

The house would be realistically valued at £265K, although I think £270K+ could be a possibility.

With a stamp duty jump from 1% to 3%, no-one pays 250-270 for a property. Unless a house is clearly worth 275 you won't get over 250 for it.

Your new place would cost near 250k, then you need 30k to spend on it. With only 15k savings + 50k released from the current home, you would be looking at 215k mortgage on this one.

1) Do I have to move my First Direct Offset Mortgage to the new property and start a new mortgage on what will be the rental property? Or does my new property have to have the 'buy to let' mortgage?

The property you will live in has a residential mortgage. The current property has a BTL mortgage or consent to let from the current lender.

So either you move your current mortgage to the new place and get a new BTL mortgage on your current home or you get consent to let on your existing place and get a new residential mortgage on the new place.
Could you afford to maintain both homes and pay a 215k mortgage on your home plus cover the other mortgage for any time the property isn't rented out?

Cash-Is-King

My valuation is accurate, I appreciate the 1-3% jump but people do pay it for the right house, however its a moot point as I am not planning on selling - the £260-275K is to establish the level of equity in the property for releasing.

If my house was to be void for a year it would cost say £7K in repayments (interest only) - I have the £15K for such times.

Can I we pay a £210K mortgage - it would be approx £1100 at 3.99% interest only moving to £1,300 if & when the rate moves to 5.5% in the future - yep we can cover this; will have to readjust a bit but a £215K mortgage isn't that uncommon I reckon.

So do you think I should talk to FD?

Thanks!

* PS - I would be buying the new one for under £250K cause of the stamp duty too!

Cash-Is-King

Any thoughts on how I beat proceed guys? Many thanks.

silvercar

Is it easy to take the extra 50k from your FD offset mortgage? If it is then I would ask them for consent to let. If they agree, then you go get a diffent mortgage (FD or someone else on the new place) and keep the FD mortgage in place.

If FD won't give consent to let, then I would port your current mortgage to the new place and get a new BTL mortgage on your current home. (Technically it is LTB not BTL, but its the same product).

So your first port of call is FD. No harm in laying your cards on the table as an enquiry. If they say no to consent to let then you ask them if you can move (port) the mortgage to the new place. I can't see why they would object to that.

Cash-Is-King

Thanks silvercar much appreciated.