Renting out our house and getting another mortgage for a bigger house

kingstreet

There's little scope for a remortgage on the property to be let because it's already near the maximum as it is. You'll also need rental income of mortgage interest at 6% x 125%.

So, on the £170k mortgage you currently have, you will need rent of £1,062 to satisfy a lender's criteria.

On the new purchase, many lenders set a lower maximum loan to value for a second property, with Santander allowing 80% and Nationwide 85% for example. That would mean you needing a minimum deposit of £45,000, possibly as much as £60,000.

Ivana_Tinkle

If you were choosing a property to invest in as a BTL, would you have chosen your current one?

NannyV

Thanks for the info on how much rental income we would need and what banks lend for second properties. Im not sure we would have saved up enough of a deposit by then ....

Yes I think our property would be excellent for renting .... within a 10 minute walk of vodafone base, also of 3 local schools, excellent size for a 3 bed semi for a family and also has office and good parking, wooden floors down stairs ..... can't fault it .... which is the issue because we need 4 or 5 bedrooms and can't extend but for what we can borrow we go from top end for 3 bed houses but bottom end for 4/5 bed houses ...

michellerfc

I too am hoping to do this next year. We have a good chunk of deposit already saved and I am hoping we will be able to put down 20% deposit on the second house.

I know that our lender Nationwide adds an extra 1.5% to your current interest rate if you want to change it to a buy to let. Apparently this is very common now with most lenders as they know that people are struggling to sell their houses and now looking to rent.

florence4

I am in the middle of doing this.

Bear in mind the maximum you will be able to borrow on your current house, in total including current mortgage, is 75% of the lender's valuation. Also be aware that lenders are valuing very cautiously at the mo - eg. EAs valued my house at £110-125k, but the BTL lender valued it at just £95k.

So in your case, if the lender values your house at (say) £200k, you will only be able to borrow £175k in total, and you have already borrowed £170k on it. If your house achieves your maximum expected valuation of £270k, you will still only be able to borrow £202.5k - so the maximum equity you could take from it would be £27.5k, and as little as £5k is quite possible.

Mattygroves2

Tax is payable on the profit you make - the rent less allowable expenses which include the interest paid on the mortgage ( but not the capital repayment).

The profit would be split 50/50 (assuming both your names are on the deeds) and would be added to your existing income and taxed at your individual tax rates. So if your husband is a higher rate payer he would pay 40 or 50 % tax on his share.

kingstreet

florence4 wrote: »

maximum you will be able to borrow on your current house, in total including current mortgage, is 75% of the lender's valuation...

... So in your case, if the lender values your house at (say) £200k, you will only be able to borrow £175k in total, and you have already borrowed £170k on it. If your house achieves your maximum expected valuation of £270k, you will still only be able to borrow £202.5k - so the maximum equity you could take from it would be £27.5k, and as little as £5k is quite possible.

75% of £200k is £150k, not £175k.