buying 2nd property to live in, and keeping 1st to let - help, where to start?

OrangeSherbert100

considering upgrading to bigger house but want to try and keep our existing family home and rent it out. no idea where to start on best way of financing the purchase and accessing existing equity in our current home. know we'd have to switch to buy to let mortgage for our current home if we did this, but what's best way to finance buying the other one? thx

dimbo61

Well its all about the money!
Have you got a deposit to put down on the new property?
Do you have lots? of equity in your existing home ?
Your income ? and your OH,s income ? KIDS
The price of the new HOME you want to live in.
How much will your old property rent out for ?
For a BTL mortgage you normally need MAX 75% LTV and the rent must be 125% of the mortgage costs each month IE mortgage £400 a month then rent would need to be £500 a month.
If you have lots of equity in your current home you maybe able to remortgage onto a BTL and release some of the equity as a deposit for the next house.
May be time to speak to a " Whole of market mortgage broker who deals in BTL mortgages"

florence4

I'm in a similar position and posted some info on someone else's thread about an hour ago; maybe that'll help

I'm a new user so I'm not allowed to post links (!) so you'll have to search for it in the list. The thread is called "Can I Buy Another property and rent mine out?" and it's just a few below yours at the moment...

OrangeSherbert100

thanks - equity is around 150k, income 70k - wanting to buy at around 350k. don't know yet how much rental we'd get for current house as only starting to look at this. Looking at renting to student market, very similar properties in our location making approx £1300 a month.

florence4

Or of course I could just cut-n-paste here what I said there...!
.
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I'm in a similar position... As far as I can discover, I think you (and I) will need to take out a buy-to-let mortgage on the property you currently live in, to raise the capital to put towards the purchase of your new home. You will then take out a standard residential mortgage on that.

The amount you can borrow through a BTL is worked out by two factors:
(a) loan-to-value - usually a maximum of 75% - so if your house is valued at £200K you could theoretically borrow up to £150K. Interest rates are better, the lower the percentage; and
(b) predicted rent that comfortably covers the mortgage payments - banks seem to look for rent to be at least 125% of the mortgage, so if you can get rent of £500/mth, you could get a mortgage that will cost you up to £400/mth.

But frm what you say, although your house is valued at about £210K, you only have about £110K equity in it. I have a feeling BTL lenders may only lend 75% of the equity rather than the value - which would then mean you could only raise £77K, which would cost you about £300/mth. A mortgage advisor will be able to confirm.

The amount you can borrow on a normal residential mortgage is worked out according to your income, with better interest rates for bigger deposits.

So from what you say (and I'm NOT a financial advisor!) it sounds like you could raise £70-100K from your current house. That would give you a 23-33% deposit on a new house. On combined incomes of £58K you might be able to get a resi mortgage of £150-200 (you'd need to check) but it might leave you a bit short of your £300K target.

It would probably be do-able, but like All Things Mortgage, if you want to do something a bit tricky, it'll probably cost you more!

Good luck!

kingstreet

Things to consider;-

typical maximum LTB/BTL is 75% of the value

you'll need rent of 125% of monthly mortgage interest assuming perhaps 6%

new property will see LTV limited by some lenders ie 80% Abbey/Sant, 85% Nationwide etc.

dimbo61

AH the student market ( easy money or what!!!!)
Now one or two minor things to consider?
Type of house, number of floors Include cellar, loft, etc
Number of bathrooms, location to uni, colleges etc
Transport buses,trains, shops, nightlife,
LICENCE from the council HMO!!!!
Now the property itself ! Size of each bedroom, number of sockets, light fittings, security, energy rating ( F+G rated properties ??? )
Broadband, bathrooms, double glazing, fire safety with smoke alarms etc
Like I said EASY MONEY

OrangeSherbert100

thx for posts so far - hubby is a uni lecturer and our house is right next to a uni and a med school so we have pretty good access to househunting students