Mortgage - is this even possible?

kevmarks

We currentley own a terraced house which we have around £20k equity in. In a few years time we were thinking of buying somewhere else and renting the terrace out.


1, Could we turn our current mortgage in to a 'buy to let' to rent out?

2, Would the buy to let mortgage then cause us any problems getting another mortgage approved for our new place? We will have saved up a 10% deposit by then.

HappyMJ

kevmarks wrote: »

We currentley own a terraced house which we have around £20k equity in. In a few years time we were thinking of buying somewhere else and renting the terrace out.


1, Could we turn our current mortgage in to a 'buy to let' to rent out?

2, Would the buy to let mortgage then cause us any problems getting another mortgage approved for our new place? We will have saved up a 10% deposit by then.

You may be able to get "consent to let" in a few years time. It may still be on the same terms as your current mortgage or they may add an interest loading to it. It depends on the mortgage provider.

No problem at all as long as you can afford it. Really you should have no less than 25% equity in your current place as well as at least a 10% deposit plus fees and charges and enough for moving costs on another place but that's just a guideline.

kevmarks

Thanks, it sounds a bit simpler than I thought. My GF is worried that the bank will take in to account our current mortgage payments as well as the payments on the new mortgage even thought we would have a tenant in the terrace most of the time.

Thrugelmir

You would obtain a far better mortgage rate on new residential property if you had a deposit greater than 10%, i.e. by selling your existing property to release the equity.

So crunch the numbers to see if letting is viable and gives a worthwhile return. .

kevmarks

We could put more than 10% down it wouldn't be a problem so I dare say we would get a pretty good deal on another mortgage. I don't have a pension at the moment so I was hoping we could sell this place when it is paid off and use the cash to retire.

Thrugelmir

kevmarks wrote: »

I don't have a pension at the moment so I was hoping we could sell this place when it is paid off and use the cash to retire.

Not the most tax efficient way of building a pension.

Suggest you seek professional advice before jumping in.

kevmarks

It will be a couple of years or so before we are thinking of moving. I am 35 now so retiring is a long way away yet. Hopefully the tenants will have paid our mortgage off for us. I am going to join the pension scheme at work but I probably wont pay that much in to it.