Remortgaging House To Buy New Property

scott72555

Hopefully I'm posting this in the right section, was wondering if someone could give me some advice.

I have a property valued at £70,000 which is totally paid off. This property is rented out through an estate agent and I get a net profit each month of £300 from it.

I stay with my partner in their house and what I was planning on doing is remortgaging to enable me to buy and rent out another property. My salary is £17,000 per annum.

Can anyone suggest the best way to go about buying a new property, valued between £120k to £150k given this situation? Or if this is even possible with my salary and the home I have which is paid off.

Thanks in advance.

kingstreet

So you're looking for a buy to let remortgage on an unencumbered property. You may struggle as there's no existing mortgage, you don't own the home you occupy and the property value and your income will put off a few lenders.

However there are possibilities and you may need some maths to help you here. Lenders on the whole accept an application where rental income exceeds the interest-only mortgage payment by 25%. Your £300 a month rent (?) would equate to a £240 per month interest payment. Based on a 5% mortgage rate, this would give you a maximum mortgage of £57,600.

As £57,600 is more than 75% of the value of the property, your maximum mortgage would more than likely be scaled back to that level, £52,500.

This would give you the deposit for your next purchase, leaving you needing to raise another BTL mortgage of between £70k and £100k. At the higher level, the interest-only payment at 5% would be £417, so you'd need the second property to generate a rental income of £520 per month.

I suggest you find yourself a good whole of market or independent broker to place and run these applications for you.

scott72555

That helps alot, thanks !

lswalker11

Hi,
I'm also new here and have a similar problem. I own a property outright (£140k value). I am looking to remortgage to 75% to raise a deposit to buy a home i will live in. When talking to banks they say they can lend but i cant live in the property i buy. My salary is in excess of 60k so affordability is no problem. I need to get deposit for the new house quickly but intend to sell the house i own outright in 6 months once i move into the new house and use the proceeds to reduce the mortgage. Has anyone got similar experience and know a bank that will lend but not require me to live in unencumbered house.
Thanks in advance.
Lee

Sugared-frog

lswalker11 wrote: »

Hi,
I'm also new here and have a similar problem. I own a property outright (£140k value). I am looking to remortgage to 75% to raise a deposit to buy a home i will live in. When talking to banks they say they can lend but i cant live in the property i buy. My salary is in excess of 60k so affordability is no problem. I need to get deposit for the new house quickly but intend to sell the house i own outright in 6 months once i move into the new house and use the proceeds to reduce the mortgage. Has anyone got similar experience and know a bank that will lend but not require me to live in unencumbered house.
Thanks in advance.
Lee

Well I'm in a similar (ish) situation in that we have re-mortgaged and are in the process of buying the second house. However it needs work doing/we want to extend, so we want to live in the first one whilst we have the work done and then sell the first one later. (After sorting out the problems with the first house - we didn't want a house purchase to be held up with selling it). The re-mortgage has gone through OK, but now the first bank are saying that must be our principle residence. Well we are certainly intending to do that for the meantime anyway. Not sure how we prove it is our principle residence - especially as we may end up living in both for a bit, splitting the family over the two locations (for schooling purposes).

So I'm interested in any responses you get.

kingstreet

lswalker11 wrote: »

Hi,
I'm also new here and have a similar problem. I own a property outright (£140k value). I am looking to remortgage to 75% to raise a deposit to buy a home i will live in. When talking to banks they say they can lend but i cant live in the property i buy. My salary is in excess of 60k so affordability is no problem. I need to get deposit for the new house quickly but intend to sell the house i own outright in 6 months once i move into the new house and use the proceeds to reduce the mortgage. Has anyone got similar experience and know a bank that will lend but not require me to live in unencumbered house.
Thanks in advance.
Lee

This isn't similar to the OP's situation at all. He has one rented property and wants to buy an other.

You simply want short-term bridging finance to cover the period between buying the new property and selling the old one. Talk to a bridging finance specialist. Tiuta comes to mind.

Loopgames

kingstreet wrote: »

So you're looking for a buy to let remortgage on an unencumbered property. You may struggle as there's no existing mortgage, you don't own the home you occupy and the property value and your income will put off a few lenders.

Thanks for your useful posts...it's very interesting to note what you said about there not being any BTL mortgages available to those who don't own their own homes. Did I understand this correctly?

kingstreet

Loopgames wrote: »

Thanks for your useful posts...it's very interesting to note what you said about there not being any BTL mortgages available to those who don't own their own homes. Did I understand this correctly?

Most lenders look for their BTL customers to own a property for their personal use or be carrying out an LTB before they will consider lending to them for "investment" purposes.

lswalker11

Thanks kingstreet. i looked at tiuta and the max term is 12 months. that could be a problem if yhe house doesnt sell in that time. yorks'hir has offerred the money but want me to live in unencumbered which is not a prob (its 5 mins away from new house) the issue i may have is getting out of the mortgage when house sells? Rate for them is lower than bridging.

kingstreet

You have to compare the cost of bridging and the mortgage costs on a fair basis. If the bridging is free to repay and you are stuck with a mortgage with an early repayment penalty, the cost of the bridging may then look a lot more attractive. Comment about the twelve month thing noted.

Yorkshire is probably a great lender for a normal borrower, but you have a square peg in a round hole scenario.

I'd talk to an independent or whole market broker in your area, as you're more likely to find greater flexibility off the high street.