Am I going to get into trouble?

sherpa_2

I own a flat in London worth approx £220,000 with £50,000 outstanding on the mortgage. I earn just over £30,000. I also have approx £12,000 in cash and cash isas

My partner has been offered a new job and we are relocating. I am going to continue working for my current employer, full time at first then two days a week in the new year. I will also work on a freelance basis - I'm confident that I will get work, I have already been offered some since we decided to move, and I have previously worked freelance in the same industry.

We will want to buy a flat jointly in our new location, probably in January or February, for about £170,000, but of course I won't be able to borrow at that point (though my partner will be on a salary of just under £30K so she'll be fine for her part of the mortgage)

My thought is to remortgage my current flat, extending the load as high as I can, to £115,000 or so. This will be covered by renting out the flat, and I could use the cash (together with some savings) to put down my half of the price of the new property, so I won't need mortgage on that property.

Can anyone see any major flaws in this plan that I should consider? I know that the mortgage company wouldn't be happy, but as long as I can pay off the loan (and I'm sure I'll be able to) will I get into any trouble? Am I misunderstanding the situation with the new property, and will my circumstances still be taken into account, even if I'm putting down my portion in cash? I had originally thought of taking a buy to let loan on my existing flat, but I thought I wouldn't need to if I didn't need a loan on the new place ...

Any advice very gratefully received

homer_j_3

Providing criteria doesnt change too much in the Buy To Let Sector and the figures work, I guess that you could at the time look to remortgage straight on a buy to let.

If you have an idea of what the monthly rental would be on your flat, you can work out what an acceptable amount of capital raise will be allowed. You do this by ensuring that your monthly rental is at least 125% of your proposed mortgage payment. I would go 130% to be on the safe side but 125% in the norm.

You can capital raise at this point - there is no point raising the capital now unless you need the money now as you only pay interest on it.

As Al Mac states, there are some tax benefits to a BTL/Investment property so you should maybe read the proprety threads as there seems to be some people very experienced on this area.

sherpa_2

Thanks very much for your replies.

Having done some more sums, I realise I couldn't borrow enough on my current salary to pay for the new place, so I would need to have a Buy to Let Mortgage anyway.

Based on the calculation that the rent should be 1.3 times the interest-only mortgage, I could borrow a maximum of £166,000 in total (76% LTV ratio) but I'm more likely to borrow approx £130K-£140K. However, will my ability to borrow this be affected by the fact that my salary at that time will be approx £12,000, plus freelance income. According to online searches I don't seem to be able to get a BTL mortgage, despite me wanting to borrow well under the maximum according to the above - but does is this just online searches, and I'll be fine if I speak to a broker?

Thanks again for any sage words.

herbiesjp

You the meet the minimum income criteria that a lot of BTL lenders have - althoughy some lenders do have higher minimum income requirements.

Without knowing the exact rental income figure difficult to say.

Who is your current lender?