Let to buy - How does it work?

Floxxie

Hello,

I'm just looking for some advice on future options.

I currently have a house with a £100k mortgage and equity of £140k. If I was to rent out my current house to purchase another, what criteria would need to be fulfilled and how would it work?

For example, would I need to change my existing mortgage to an interest only? Would I require a deposit for the new house?

Thanks!

herbiesjp

You would need to advise your current lender, and they will tell you what you could do with them.

If what they offered was not competitive, you could look at moving elsewhere, and at that point you would need to look at changing the stauts to a BTL.

Ther reason why you would change to BTL or go to a Let to Buy lender for second purchase, is because that way they will "ignore" the property in the background as long as the rental income covers the mortgage payments (a rough rule of thumb is between 120 & 130%)

You do not have to change the mortgage to interest only if you do not want to.


The purchase of the next property is just like any other purchase, and just like the mortgage you currently have.

It will be based on the earnings you have (less any regulat commitments) and the deposit you have - so yes you will need a deposit.

If you do not have any funds, you could always look to release some of the equity in the first property to put down as the deposit on the second one

What rental incoem do you expect to get on your first property?

HTH

Floxxie

Thankyou.

So in summary:
Check with mortgage lender for product options. Change if necessary. Rental on current property must be 120-130% of monthly mortgage payment. Get tenant in.

Second property treated as if a first property so require deposit and related earnings.

Estimated rental on this house would be between £800 to £1000 per month. Personally I wouldn't pay it (I'm not use to rental prices and paying them) so my other thought was to reduce the rental amount required by either reducing the outstanding mortgage or making it interest only and extending the term for the maximum we would be allowed.

By doing the second option, we could then save for a deposit for the second property.

Is let to buy a popular option with mortgage lenders? Do you personally see a tightening up of the 'rules' if the housing market becomes unstable?

Many thanks for your input, I now have several options to explore.