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Do I qualify for a buy-to-let?
Options
GregDixon
Posts: 51 Forumite
Hello everyone, looking for some advice please.
I currently own 1 property, which I am letting out. I have permission from my mortgage company to do so, and I am paying the tax man his due.
The flat is worth around 140,000, with an outstanding mortgage of 80,000. I am coming to the end of a 5 year fixed repayment mortgage, and wondered if I would be able to remortgage to a buy-to-let.
Am I able to raise capital from the equity in the property to purchase another property? The new property would become my home.
I could sell the flat I currently own, but I thought it would be better if I was able to keep it for the future.
The flat currently pays comfortably more than the mortgage is, and any remortgage should see that difference increase even more.
I just don't know if this type of option is still available, or If I would qualify doing it this way round. I think the norm is to have the new property as the let?
Any helpful advice would be welcome,
Thank you.
I currently own 1 property, which I am letting out. I have permission from my mortgage company to do so, and I am paying the tax man his due.
The flat is worth around 140,000, with an outstanding mortgage of 80,000. I am coming to the end of a 5 year fixed repayment mortgage, and wondered if I would be able to remortgage to a buy-to-let.
Am I able to raise capital from the equity in the property to purchase another property? The new property would become my home.
I could sell the flat I currently own, but I thought it would be better if I was able to keep it for the future.
The flat currently pays comfortably more than the mortgage is, and any remortgage should see that difference increase even more.
I just don't know if this type of option is still available, or If I would qualify doing it this way round. I think the norm is to have the new property as the let?
Any helpful advice would be welcome,
Thank you.
0
Comments
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I think you need to leave in 25%, so you could only take out £250000
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Had not read that fact anywhere, and it pretty much ends the idea..
Was hoping to borrow more like 75% of the equity.
Thank you.0 -
You'll be able to borrow upto 75% of the value of the property and your rental income will need to be 125% of the monthly mortgage interest based on an assumed rate of around 6%.
In your case, 75% is a mortgage of £105k x 6% = £525 mortgage interest and 1.25x that means you would need rent of £656 to make the proposition stand up for a BTL lender.
As marliepanda says, this means you'd have £25k deposit for the deposit on your next home, assuming fees and any stamp duty come out of your pocket.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
Ok thank you both, it answers my question. Sadly negatively, but it's good to know that it's not really an option. Maybe in a couple of years time when I've brought the mortgage down more and have more equity available I can consider this again.0
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Actually, I am not sure I understand your answer, so if it's ok I'd like to ask another question.
The property currently earns 680 pcm in rent, so that would meet the criteria you state.
But I'm stuck trying to get my head around why it is only 25k if I can borrow 75% of the property value ?
This is probably really obvious, but math is sadly not something I am gifted with..0 -
75% X 140K = 105K
So borrowing increased from 80 to 105 releases 25k as next deposit.0 -
Ah! So I'm increasing my mortgage from 80k outstanding back up to 105k outstanding, giving me 25k towards a second mortgage!
Gotcha! Thank you.0 -
£140K = 100%
£70K =50%
£35K =25%
Therefore 75% is £105K and you would have £25K left BEFORE remortgage costs which can be high for BTL mortgages0 -
Ok I see, I was very naive. I thought/hoped I'd be able to borrow the majority of the equity. So this option is not an option!
Thanks all for your time and replies.0
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