Buying a new home and keeping existing flat to rent

grd10

We are a couple who are looking to buy a new property but keep our existing two bedroom flat. I own our existing flat on my own although it is very close to being in negative equity so there is little value in selling it. The property does also have good rental value which does offset the cost of the mortgage.

Our joint incomes would also allow us to buy the 2nd home although I am unsure what the building society line is. Would the property have to be rented out before they would offer us a mortgage.

As the above may suggest we are a little clueless as to how to proceed. Any help, advice would be most welcome.

Cornucopia

Sounds okay. You'd need to get the actual costs from the BS of the mortgage after they have given Consent to Let (you need their permission).

Once you have those figures, get a couple of rental estimates from local letting agents, and you'll know what kind of profit you'll be making. You need to be in profit (not merely break-even) because there are periodic costs, possible periods when the property will be empty, and the possibility of mortgage rate rises.

You should be able to apply for the new mortgage at the same time as converting the old one to letting, and co-ordinate the dates and funds accordingly.

GMS

What percentage deposit do you have for the new purchase?

Many lenders restrict second property purchases.

grd10

We have 10% deposit and have seen a house we really like. We also have enough for stamp duty etc but not much after that. I read on one message board that the building society would also want to see we had savings to cover 6 months without rent in the old flat. Is that true? we could probably borrow that off parents but thi move will leave us cash poor in short term.

dimbo61

" I own our existing flat on my own "
No you do not own your current flat ! You have a mortgage which is more than the property is worth or at best break even if you sell.
Now you need "Consent to let" from your existing lender if the figures add up.
The Lender will want to see that the flat will rent for 125% of the mortgage costs IE Rent £500 a month mortgage £400 a month.
Consent to let usually has a time limit as well which is something you need to check with your lender.
The Lender may say NO we will not give consent to let at all so then you have to sell.
You need a deposit for the next property so 10/15% or more

grd10

a slightly aggressive sounding reply. The flat would just about break even if we sold but I take your point. I think I was clear in my post I understood that I did indeed have a mortgage, apologies if this was not the case.

The only issue I think is the 125% coverage from the rent. I suspect rental vlaue would be close on that front! probably a little under.

We do have a combined salary of 110,000 and probably looking to borrow around 280,000. What you reckon?

getmore4less

Should be saving shedloads of money so wont take long to make the numbers look better

How big is the current mortgage? What is the rental potential.

grd10

current mortgage is 155K
repayments of 850pcm

rental potential is 1050pcm

although i think then theres agency fees of 10-13%

Saving not a problem, the issue is we've seen somewhere we like and not sure if we can go for it now!

New property is 310,000 we have about 31k deposit but not much after that.

Dave_Ham

Get yourself a broker and other things being equal, this should be achievable.

Rates may not be super attractive, but you do have a limited supply of lenders in this marketplace.

Who is your current mortgage lender?

grd10

Nationwide

Dave_Ham

They are usually ok on a consent to let basis, but unlikely to hold a solution on the new purchase.

A decent broker will sort this quickly, although do beware on any Estate Agent broker specifically the ones you may buy through.

Best of luck