Want to move, but not sell?

SLITHER99

Hi

We are looking to move area in 2014. However, I want to do a little bit of pre-investigation of how this works before getting my accountancy hat on.

At the point of moving, my (well sounded) predictions are that

• We will have approximately 36% equity in our home (64% owing)
• This is assuming a £200k value
• We will be free of all other debts by the end of 2013 (no credit cards, finance, etc)
• We're looking at spending approximately £200k in our new area
• We should technically be talking remortgage this year for a better rate, but I'm thinking it would be more prudent to wait for next year simply because of our plans

Instead of selling and buying again, I am actually wondering about renting our current home out and mortgaging a new property in the area we want.

As this year is paying off debts and doing some renovation, we won't be able to save any new equity, however we will be completely debt free.

We currently have a joint repayment mortgage on our current property (combined salaries of approx £70k). Our current area does have a healthy renters market and given our proximity to amenities, stations, etc, there shouldn't be a problem renting it out for at least £800 a month (taking the lowest value predictable).

So, in a nutshell, what happens? Would we in effect apply for two seperate mortgages, i.e. a remortgage buy-to-let on this one and use our equity as collatoral on the new mortgage/house? Or just a single mortgage with both properties combined? Or is this even possible at all?

Appreciate any advice in advance - please ask if I've omitted any pertinent detail!

kingstreet

If you only have 36% equity in your current home, you'll only be able to remortgage to 75% onto a BTL product, not really creating enough of a depot for your next home.

In addition, for a BTL, you'll need the rental income to be about 125% of the monthly mortgage interest at 6%pa, or thereabouts.

For £150k mortgage (75% of £200k) that means your rent needs to be £938 per month, so it sounds like you may be better off leaving your current mortgage as it is and asking your current lender for consent to let, rather than change to a formal BTL product. If you do the remortgage, the £800 rent will just about support the size of mortgage you have now.

For your next home, you'll need about 15% deposit, possibly more with some lenders and you can hope the let property in the background is ignored if it is self-financing.