Advice

Demod417

I currently own a house which I have just had valued at 135,000.IOwe. 6500 on the mortgage with 7 years running . I'm thinking of renting my house out and have a guaranteed rental of 400 -650 month . I have 30.000 cash in various accounts but only a combined income of 27,000 annual between me and my wife ... We have seen a property worth 180,000 could someone advice me on the best way to use my assets ??

Guest101

??

if you're asking people you don't know how to spend your money, perhaps you need to stop and read up on all the previous advice.

Once you have an idea of what you doing, im sure eeryone will give u ptactical advice

OR go to the bank withdraw it all, put in an envelope and send to....

Yorkie1

I think the OP is asking whether there is any way, on the facts / figures given, for him to be able to let out his current house and buy a new one.

For example, option A = remortgage current house to a BTL to release equity, and use that equity to fund deposit on new house.

Option B = not remortgage current house (which I assume is on a residential mortgage at present), but focus on new property's mortgage.

OP, I don't know whether either is possible as I'm not an expert at all. Hopefully others will be along to help. There may be other options to the examples I gave above; who knows?

However, if you don't remortgage your current property to a BTL product, you'll need to seek consent to let from your current lender. They may say no, or yes with an increased interest rate, or yes with an additional charge, or yes without penalty. But it is only likely to be for a short time e.g. max 3 years, and then you'd have to remortgage anyway.

Also, do you know what being a LL involves? All the extra costs?
http://forums.moneysavingexpert.com/showpost.php?p=52421475&postcount=6

kingstreet

I suspect Yorkie is on the right lines.

Remortgage the current property onto a let to buy product. This can be done upto 75% of the value of the property, or if lower, the amount supported by the possible rental income.

Use the funds from this to repay the existing mortgage and to raise an increased deposit for the new purchase. This will give you a lower mortgage on your new home and hopefully a better rate.

The mortgage on the letting will then attract tax relief, as the interest on it will be an allowable expense, along with maintenance, letting agent, insurance costs etc. (Seek professional advice on tax issues!)

Example - current value £135,000. Maximum LTB mortgage 75% = £101,250. Rental income would need to be £632. If lower, the mortgage amount would have to be scaled back to stay within lender's requirement. Normally, that's rental income must be 125% or more of monthly mortgage interest assuming rate of 6% per annum.

If the rent is £500 per month, the corresponding mortgage amount would be £80,000.

If buying for £180k, you'd then need a mortgage of only £70k (ish) and that would be well within your income/affordability.

Be careful to pick a lender for the purchase which will ignore a self-financing let property/mortgage in the background, as if you get one which wants to "tax" your affordability, the plan will come crashing down if you can't evidence your ability to afford both mortgages if you have a tenancy void.

You may be better off putting this plan into the hands of a good whole market broker to get the right lenders and rates for it.

00ec25

as kingstreet says, mathematically it is possible, but think long and hard about whether you have the financial reserves to cover 2 mortgages at the same time

it is guaranteed that at some point you will have a rental void and will need to pay 2 mortgages at the same time

kingstreet

I agree. Perhaps an emergency fund of upto six months payments should be held back to cover such an event. It may mean a slightly larger mortgage, but the peace of mind may be worthwhile.