Remortgage, buy to let & releasing equity

proc7400

Hi everyone,
I am seeing an advice re buying a property (house) - value up to 380k. And, being honest, not sure where to start... So:

1/ I am the only owner of a 1 bedroom flat in London area (bought few years ago for 189k; I have had a cash deposit of around 100k the rest was a mortgage - around 80k, the interest rate at that time was almost 6% - which is what I am currently paying). The flat is rented out - I live with my partner in different London area. Tenant pays more than my monthly mortgage repayment. (flat is rented with agreement of my mortgage provider).
2/ I am after property which costs around 380k
3/ what is the maximum percentage of equity which I can release from the rented flat? Do I need to get flat valuated first?
4/ shall I remortgage the flat first and change the type of mortgage from "residential" to "buy to let"? (to secure better deal - and pay smaller interest rate). The flat won't be my residence.

Any suggestion?

holly_hobby

proc7400 wrote: »

Hi everyone,
I am seeing an advice re buying a property (house) - value up to 380k. And, being honest, not sure where to start... So:

1/ I am the only owner of a 1 bedroom flat in London area (bought few years ago for 189k; I have had a cash deposit of around 100k the rest was a mortgage - around 80k, the interest rate at that time was almost 6% - which is what I am currently paying). The flat is rented out - I live with my partner in different London area. Tenant pays more than my monthly mortgage repayment. (flat is rented with agreement of my mortgage provider).

proc7400 wrote: »

2/ I am after property which costs around 380k

What is the maximum percentage of equity which I can release from the rented flat? Do I need to get flat valuated first?

Shall I remortgage the flat first and change the type of mortgage from "residential" to "buy to let"? (to secure better deal - and pay smaller interest rate). The flat won't be my residence.

Your lender may not allow you to release equity whilst you are under a conset to let agreement. So moving to a new lender may be mandatory if you want to release some equity - if your existing lender will allow you to release equity they will may require a new survey.

Assuming they won't give their permission to release equity, your remortgage will have to be a traditional buy to let (BTL) mge (as the property is not your main res & will continue to be rented).

There are various BTL providers, some high street such as Halifax who have a max ltv of 75%, whom also have fee free BTL rermortgages (basic legals & survey).

You have asked for the max LTV, which is as far as I am aware, available with only 1 provider (specialist lender)Kensington - who offer a max LTV of 85% (avail for pch & remortgage). Current 85% mge product of 5.99% - which is just about what you are paying with your current lender.

You will need a min salary of 30k for 80% + LTV (25k below 80%).

Kensington require a rental income of 120% of mge repayment. (however generally 125% is reqd across the market on a 6% ballpark figure). So crunch some numbers to see if the figures reqd, work within the noted rental income criteria.

Although Kensington have a generous LTV compared to others in the market, you do pay for it with the fees, which are a little steep ... but horses for courses I suppose if you want highest poss LTV.

I have attached a link to Kensington product guide for your info:-

.http://www.kmc.co.uk/etc/medialib/investec_media_library/kensington/pdf/intermediaries.Par.36163.File.dat/18.04.11%20Buy%20to%20Let%20Product%20Guide.pdf


I have given the above link to give you some idea on whats avail at max lending limits, but do have a through chat with a whole of market broker, who will not only source the most suitable lender for your circumstances from the market as a whole, but provide you with guidance and support throughout the whole remortgage process. (check their fee structure).

You may continue to offset mge interest (including that released as part of your remortgage) on your BTL property against rental income for tax purposes, up to the original pch price of the property i.e 189k.

As a current landlord I assume you are already familiar with income tax and cgt liability on disposal of your currently let flat.

Hope this helps

H