Can I let my house in order to buy another?

mama21

New to site and any info would be grately received...

I have had my house on the market for a couple of months and had 3 viewings - no offers. I want to move in the summer hols to be settled in time for new baby arrival mid september. Time is now ticking and I am thinking of letting our house for 6- 12 months in order to be able to move in summer hols (hubby is teacher so would be really useful) rather than wait for a buyer and going through the process of selling in a chain etc.

Financial facts:
Joint earnings are approx £45k, current mortage is £159k on house valued at £240k - £250k. Houses we are looking at buying are £250k and should be able to get deposit together of around £135k (loan from family until our house is sold)

1. Current lender doesn't do buy to let mortgages so could we transfer that mortgage over to new house and start again with a buy to let mortgage on our current house?

2. If current lender will only give us £168k based on earnings - will we be able to get a buy to let mortgage of £105k as well as keeping and transfering our existing mortgage of £159k to a new house?

3. I am confused as to how the timing of things will come together in terms of transfering our existing mortgage to a new house and starting a buy to let? Will I have to have a tenent in place first?

Please help...am desperate to move quickly!

getmore4less

Will they not consent to let?

So you need £409k borrowings total + costs

£159k ported (will they top this upto £168?)
£135k gift/loan

So you need £115k + costs.

What will the place rent for?

Setup costs for BTL will be high so can make a 6-12month rental plan not pay its way.

mama21

my current mortgage is £900+ and monthly rental has been quoted at £700 so am thinking I will need to change to buy to let to bring mortgage payments down.

yes current lender would top up the £159k to £168k

may consider longer rental period if there is signs that house prices are on the increase...depends on house the letting goes really - i am a reluctant landlord so will be seeing how much hassel it is.

will our earnings have to reflect the need for 2 mortgages or will the buy to let mortgage be considered to look after itself (if a tenant is in place)and so our earnings are not taken into consideration?

MrsMoo2U

Interesting question. I am in a similar position. Have a flat which I am interested in renting out so that I can move in with partner. However I would prefer to buy a house for us to both live in and rent out the flat. Problem is that whilst the flat is worth 130K and my mortgage is only 84K I believe that buy to let deposits need to be about 25% and I have no way of releasing the capital to use as a deposit other than if I can get a good BTL mortgage.

getmore4less

£700pm on a £240k house is gross yield of 3.5% so by the time you factor in the costs it will be much lower and with BTL mortgage rates being higher than 3.5% you may actualy be losing money waiting for the price to rise.

House is well overpriced based on rental yield.

mama21

i think it was actually £750 I was quoted in rental - if that makes any difference?

I remember my calculations at the time of speaking to a buy to let broker were that my mortgage payment would be around £570 per month and the rental £750 so I would be able to cover the mortgage payment, letting agent and insurance and have a small amount to save in a pot towards repairs... I didn't factor in the cost of setting up the BLT mortgage though.

As it isn't a 'business' venture I am looking to start up, just a way of getting out of my property in the next couple of months and selling it on when the house prices have increased a little - do you still think I will be loosing out overall as I didn't calculate that I would (as long as I sold my house for more than I can get for it now?)

Thanks for your help so far...

VIGILANT22

Quote "As it isn't a 'business' venture "
HMRC would disagree............

mama21

good point - but both my husband and I earn over our tax allowance this is probably an good reason not to want to make money - just break even on a monthly basis...

VIGILANT22

Think you need to learn more about BTL & tax implicatications........talk to an advisor

getmore4less

Its not just the BTL mortgage it also the rest of the capital that is tied up that needs to be taken into account since this increases your other mortgage.

Say you are working on selling when you can get £240k

£100k BTL @ 5% £416pm
£140k @3% £350pm(OK you are getting it interest free from family)

So allready more than the £750 rent.

Are you self managing if not that will be another £70-£100ish pm

Whats the realistic selling price?

mama21

Let me clairfy where the family loan comes in...

the rental house would have a BTL mortgage of £159K and the rest is equlity in the house (house valued at £240k)

the new house we are looking at buying is £250k and in order to purchase this (and keep the mortgage down until we sell the rental house and get the equity) we will loan a deposit of £135k. so will need a 'normal' mortgage of £115k.


so I was working on needing rental income to cover the BTL mortgage of £159k.... which we had been quoted around £570 per month and we should achieve rental of £750

now does it work?