Any chance I can keep hold of my old house?

dodgie

Hi,

My partner and I bought a house in Q4 2003 for £128,750, taking out a repayment mortgage with Nationwide for £108,750 (this is about £103K now). According to sales of similar properties in the area, the house is worth around £140K now making our LTV approx 73%. My salary is £25K and my partner's is £16K.

It's really just an idea at the moment, but we'd love to move house in the next 18 months and somehow keep hold of our current house and rent it out. Rentals of similar properties in the area are around £600/month which would cover our current approx £540/month mortgage payment.

Much as I'd love to do this, it seems quite tight to me, the next 'rung' on the ladder around here would be at around the £170-£190K mark.

We don't think we'd have a problem finding tenants, as it is in a commuting area and reasonably close to the station in a nice area (so ideal for a young professional couple). We plan to save around 6 month's worth of mortgage payments for the old property to use as a buffer when it goes empty and then give ourselves a hard limit of "we'll sell if it goes empty for x months".

What do you think the chances are of us being able to pull this off? I appreciate that would be a large total mortgage debt (£300K plus), is that how the mortgage company will see it? Or do they accept the fact that it is on two properties, one of which is buy to let?

Any advice would be most appreciated.

Rich

homer_j_3

Normally when people take Buy To Lets on they convert to interest only and providing your rent is 125% of the mortgage payment, you should be able to achieve what you are doing.

The question I would be asking is how do you aim to fund the deposit on th enext property? If you have to raise capital against your exisiting property you will have to consiuder that you will have to keep your loan to value under 85% and the payment must still fit with the above criteria.

dodgie

Thanks for the speedy reply. Well that's good news. I thought it was a complete non-starter. As I said, this is a medium term plan, and there's still a lot of saving to be done to get a mortgage buffer if the house goes unoccupied and for emergencies. Plus a deposit on the new mortgage.

We've actually got an estate agent coming around this evening to give us a valuation, so it'll be interesting to see what he says and re-adhust my sums accordingly.

From my calculations, we could borrow £11,900 on our existing mortgage which bring the LTV to 85% from our current 73%.

Rich

homer_j_3

it seems as though you are thinking fairly sensible about it so that good.

At a joint salary of 41k you are looking to borrow 4 x joint income to reach your 170k price with the deposit you may look to raise. Clearly there are 3 variables that could change your situation

1 - House prices fluctuate so what may be affordable today may be more/less affordable in 18 months time depending on the housing market .

2 - The rental market may become stronger/weaker depending on the housing market and property prices.

3- Interest rates may affect your rental income and affordability too.

Just save and save like mad and visit the situation about this time next year and you will be 6 months away from doing what you need to do and should be able to get a better idea.

dodgie

Thanks for your help homer, most appreciated

Rich

sandydog_2

Why are Buy to Lets interest only, please?