Shall I Rent Current House And Buy New? Or Sell And Move On?

Taff

Thinking of renting current property rather than selling as initially planned.

I then intend to remortgage and take out as much equity as allowed. This would pay for deposit for our new house (property value approx 150k). I intend to extend term to 25yrs and switch to interest only if allowed?

Current property valued at 120k to 125k. Mortgage is with C&G and have 59k mortgage at 0.59% above Base Rate for remainder of term 11yrs.

Also had additional borrowing of 8k last year at 6.29% fixed which ends 31.03.15 then reverts to HVR.

Mortgage balance at present is £66500.

Any extra money from rent ( if any) could be used to help with new mortgage.

I will then take out another mortgage for new property.

What would be the best way to handle this proposed investment?

Also is this proposal feasible given my mortgage information provided above?

Anybody know how much equity I could release to put down on new property?

Any other advice offered on my proposal would be appreciated as I not sure whether to rent or Sell and move on?

Many Thanks

kingstreet

If you remortgage onto a formal LTB/BTL product, you'll probably be able to borrow upto 75% of the value, depending on the rental income.

Your current lender is unlikely to lend you more, not with that existing rate. You''ll' have to pay the early repayment penalty on the additional borrowing.

You will then need a lender which will ignore the let property/mortgage in the background. Typically, you'll be able to borrow upto 80% or 85% of the price of the new property, as lenders set their maxima lower, for a second property purchase.

Taff

Thanks for your reply Kingstreet.

What exactly do you mean by - Your current lender is unlikely to lend you more, not with that existing rate? You''ll' have to pay the early repayment penalty on the additional borrowing?

Also when you say I need a lender to ignore the let property/mortgange in the background- why is this the case?

Cheers

kingstreet

Residential mortgage lenders don't want to lend money on residential rates to those wanting to start a letting business.

Therefore you will not be permitted to increase your mortgage when/if you ask for consent to let. If you were leaving the current mortgage amount the same, consent to let would be the best way to go with most lenders, as they may leave your current rate as it is.

Some do increase your rate, Nationwide for example adds 1.5%pa, while Halifax switches you to a three year fix at 6%.

That means you will have to remortgage away onto a formal LTB/BTL product with a new lender. You can borrow upto 75%, subject to rental income (rent must equal 125% of monthly mortgage interest at perhaps 6%) to repay your existing mortgage and to raise the deposit for your new residence.

You'll have to pay any early repayment penalty on any borrowing you have with your existing lender which is in a penalty period when you remortgage elsewhere.

You need a lender to ignore the let property/mortgage, as otherwise, the mortgage payment will be deducted from your income, reducing the amount you can borrow for the next property. Even worse, the amount of the mortgage may be deducted from the maximum borrowing indicated by your incomes, by some lenders. This is because some lenders assume you may have no tenant and would then have both mortgages to pay.

kingstreet

Discussion continued here;-

https://forums.moneysavingexpert.com/discussion/comment/60644461#Comment_60644461