New mortgage/remortgage/equity release advice please...

Lilyfairy

Hi,

My partner and I are hoping to buy our first house together at the end of the year and I'm a little unsure what's going to be the best way of doing this. My partner has his own house (which we live in) that is worth approximately £90,000. He has no mortgage on this. He is hoping to rent this out when we move to our own property. We are looking to buy a house together at a maximum of £150,000 and my partner has around £10,000 in savings towards a deposit. Would it be sensible just to save more money towards a larger deposit and just mortgage the new house leaving the rental property owned outright? I could be that that's a really silly thing to do but I'm not sure how it all works with regard to releasing equity/remortgaging etc.

Hoping you can shed some light on it for me.

Many thanks

Wh05apk

You will need at least 10% deposit (£15,000) + fees etc, or 15% (£22,500) to get a decent rate, you may wish to consider releasing some funds form his property to use as deposit, then you may find you could have say a 70-75% rate on the new property which woudl be a much better rate.

I am assuming your income/credit history ages etc are all ok, and would not cause problems with a lender.

herbiesjp

Raising funds from the first property will mean being able to have a bigger deposit and therefore access to better rates for you on the new purchase.

Lilyfairy

Great - thank you both for your replies. Can you advise which would be the best way of releasing the funds from the first property?

Wh05apk

You could release funds on a let to buy basis on your existing property.

herbiesjp

You would remortgage your unencumbered property on a buy to let basis, up to the amount you wanted.

The amount you can raise will depend on the expected rental income you get from it, along with the rental calculation of the chosen lender.

There are criteria hoops to jump through in terms of this first property, but also then for the lender of the new property, as they will need to satisfy their own lending policy of you having a property in the background.

getmore4less

Check it is worth starting a letting business with this property

What will it rent for?

Lilyfairy

It'll rent for around £400 - £450 pm...

getmore4less

£450-£500 on £90k is gross yield around 6%-6.7%.

So after costs and borrowing there is still some money left while rates are low but will get marginal when rates rise


Don't you have any deposit?

Whats the income situation?
That will tell you the largest mortgage on income multiples.

Lilyfairy

Yes, approximately £10 - 12,000 available for a deposit/towards the cost depending whether we can release funds from the owned property. Our combined income is around £35,000..

dimbo61

you need to find one of them nice whole of market brokers to sort out both mortgages and borrow say £60,000 on your existing property.
use this money as deposit on the new property offset mortgage and keep the £10/12K in the offset account (emergency funds)
get a tax accountant and take out the right landlords insurance etc