Buying second home and renting out first

DocHants

Ive got no idea about the financial implicaitons of keeping our current home to rent out to pay for mortgage, then buying a new home...

Our current deal recently expired, so we are now on variable, but not a very good rate (with Norther Rock!!)... Ive just arranged for a remortgage, valid for 6 motnhs, but now thinking it may actually be a good time to think about moving.

Where do I stand with regards to keeping my current home ro rent out, to cover its mortgage - would I need to remortgage this property on a buy to let mortgage? If so, I know these usually require at least a 25% deposit, which we currenlty have in equity. However, this was going to be the deposit on a new home, but I dont know if we could use our first house to help buy our second?

I suppose Im best speaking with an FA, but would just like some general advice before I do...

dimbo61

If you get " consent to let " then you dont need to change onto a Buy to let mortgage for a while ( usually upto 3 years ) but you then need a deposit to buy your next home.
Rates are very good if you have a 25% deposit and rubbish if you only have 5/10%
Why do you want to keep your existing property? Why do you want to become a landlord ?
Do you have any idea of the time and effort involved in renting out property !
Speak to a Mortgage broker or IFA

DocHants

Do you have any idea of the time and effort involved in renting out property !
Speak to a Mortgage broker or IFA

I know what you mean! having been a student for 4 years many moons ago, id hate to have to be a landlord...

Im purely thinking from the point of view of having some sort of ivestment for the future.

It was just a passing thought I had last night.. but could be well beyond the realms of affordability anyway

holly_hobby

Yes you could seek consent to let from NR - but I don't believe you will be allowed to release further equity with NR, once the election and it remains let. (as technically they are allowing you to run a semi commerical mge on residential (albeit with a possible loading) rates.

You would obviously also need a deposit for your new main residence .

You could remortgage your current property to a BTL and release some equity to fund your deposit - max LTV for a little choice is 80% (although I believe one provider via intermediaries has re-entered with an 85% deal).

Generally min earned income of 25k (although there are a select number of lenders whom don't have this restriction), and rental income circa 125% of the mge payments ( in essence to demonstate that the venture is self funding).

And you would need to exchange and complete both the BTL and new resi mortgage on the same day due to your only source of deposit coming from the BTL.

Messy but possible - I would suggest having a chat with a whole of market mortgage adviser, tell them what you want to achieve, they will nominate the most suitable way to achieve it, and source the most suitable products and lenders to your requirements (supporting you throughout the application process).

That being said, there are numerous BTL threads on here, as a potential first time landlord you must thoroughly research every aspect of this venture. You should ensure that it will return a decent yield for you, and that you are comfortable with both your responsibilities as a landlord and the various costs involved. I said on an earlier thread, BTL can be wonderfully rewarding to the indiviudal, but can also be a money pit and living hell if it all goes wrong - so tread carefully, with all the facts in hand before you decide to jump in !!

Hope this helps

Holly