Changing mortgages

jamie13

Hi,

Me and my gf currently have a joint mortgage on our property for £100k, we've now had the house valued at £145k and would like to release the equity to buy another property with my gf.

I'd also like to keep and rent my current house, but jointly with my dad.

How would i go about this? Would my gf sell here 50% directly to my Dad?

I'm aware that i'd need to change my current mortgage to a buy to let with my dad. And that i'd need to leave some equity in the current house as a deposit.

Any pointers in the right direction would be great.

Thanks
Jamie

kingstreet

If you remortgage onto a BTL, you'll probably be able to raise all of £8k. Typically, you can borrow upto 75% of the value of the property and if you're already at £100k...

You'll need the potential rental income to exceed the mortgage interest (based on around 6%pa) by about 25%.

This means on £108k, the monthly interest would be £540 and the rent needed, £675. Is that likely?

In terms of the transaction, I suggest you remortgage with your father as a joint applicant, carrying out a transfer of equity to remove your girlfriend at the same time. Please consider the stamp duty implications in doing so.

http://www.hmrc.gov.uk/sdlt/calculate/transfer-ownership.htm

jamie13

Thanks for your reply.

Obviously i would be able to take out more equity if my dad were to put in part of a deposit also?

As for the rent, if this cant be met are we able just to top up the amount that isnt covered by rent?

Thanks for you guidence on transfer of equity this all makes sense and as for stamp duty i assume a solicitor can sort his all out.

Thanks in advance
Jamie

kingstreet

You can borrow upto the LTV limit I've mentioned, If your father provides cash from his own resources, that increases what you have available, yes.

No. If the rent does not justify the level of borrowing requested, the lender will reduce the mortgage to the amount which corresponds with the maximum based on the rent/interest formula.

Using my example from before, if the rent is only £500 per month, the mortgage interest would then be a maximum of £400 and the maximum mortgage amount £80000.