Renting out current house and buying another?

gazfocus

Brighty wrote: »

I've done this, rented my house out and relocated. First to check is consent to let, some lenders will want the rent to cover 125% of mortgage or they won't consent, others don't seem to care so long as you fill in a form and pay the admin fee (Nationwide didn't even ask what the rent would be). As above, getting a new mortgage will depend on the lender, some will include both mortgages in affordabilty, some will ignore the old one if it is self financing (rent 125% of mortgage). Natwest ignored ours originally, as did Nationwide when we remortgaged our new home to them recently, although i beleive they limit LTV to 85% max in these situations.
If you're not selling, do you have enough of a deposit saved up to buy the new place? 15% would probably be good?
Other things to consider
Could you afford to pay both mortgages if for whatever reason you had no rent coming in? Gap between tenants, non paying tenants etc? I don't just mean a month or 2, what if a tenant stopped paying and wouldn't budge, resulting in a lengthy court battle to evict?
You would need to register for a tax return and pay income tax on the rent you receive minus allowable expenses such as mortgage interest.

Brighty

Thanks for your post Brighty.

I have spoken to the mortgage lender and they have said they would need a copy of the rental valuation and an £85 admin fee and then I can get the consent to let.

We are aiming to have a minimum of a 25% deposit for the new house.

At the moment, yes we can afford to pay both mortgages - it will be tight but that's one of the things I'm looking at - whether I can get some insurance to cover a tenant not paying.

pcgtron

gazfocus wrote: »

Thanks for your post Brighty.

I have spoken to the mortgage lender and they have said they would need a copy of the rental valuation and an £85 admin fee and then I can get the consent to let.

We are aiming to have a minimum of a 25% deposit for the new house.

At the moment, yes we can afford to pay both mortgages - it will be tight but that's one of the things I'm looking at - whether I can get some insurance to cover a tenant not paying.

What you also need to know is what the property would let for and how much above thecurrent mortgage that is. We did this with our old lLondon flat. We werevery restricted on who we ccouldgo with as far asa tresidential mortgage was concerned, as we had to go with one that took the property as self financing before we had tenants in. This for us was as easy as a letter from our letting agent clarifying what they could rent it for. Our residential rate however, isn't as good as we could have got if we had the pick of the lenders

Thrugelmir

I would do the sums to see how viable letting the property is. May look good in the short term. However people overlook replacement boilers and double glazing. Kitchens and bathrooms that grow old and tired. When it comes to the longer term. Also CTL is only temporary. Will Leeds expect you to move to a BTL mortgage in a few years time. Another cost to consider.

[Deleted User]

I'd like to do exactly the same and I'm so interested in how this goes, I'm contacting everyone now to see if we can proceed just like you.

gazfocus

pcgtron wrote: »

What you also need to know is what the property would let for and how much above thecurrent mortgage that is. We did this with our old lLondon flat. We werevery restricted on who we ccouldgo with as far asa tresidential mortgage was concerned, as we had to go with one that took the property as self financing before we had tenants in. This for us was as easy as a letter from our letting agent clarifying what they could rent it for. Our residential rate however, isn't as good as we could have got if we had the pick of the lenders

Thanks for your post. I've got an estate agents coming round on 28th December to do a sale and rental valuation so I'll have a better idea then. I suspect I'll just about break even and the rent will cover my mortgage and shared ownership rent, however, with my mortgage being a repayment mortgage, I'll be better making a 'profit' as the rent will be repaying my mortgage if that makes sense.

We'll be going through a mortgage advisor that we've used previously for our new mortgage so I have every faith in her ability to get us the best deal.

Thrugelmir wrote: »

I would do the sums to see how viable letting the property is. May look good in the short term. However people overlook replacement boilers and double glazing. Kitchens and bathrooms that grow old and tired. When it comes to the longer term. Also CTL is only temporary. Will Leeds expect you to move to a BTL mortgage in a few years time. Another cost to consider.

Thanks Thrugelmir. I'm waiting in anticipation for the rental valuation to do the sums but from looking at similar properties for rent in the area (that are showing as Let Agreed), I expect I'll get a small bit more than break even, however, I'll also be saving money separately to pay the mortgage off within a couple of years. The kitchen is brand new and I'm looking at costs of replacing the bathroom before the house gets rented out, but will make sure I put funds to one side for possible new boiler.

Regarding the CTL, Leeds BS said that I can renew it on an annual basis. They didn't suggest there was a limit but it's definitely something to think about so thanks for that.

assj wrote: »

I'd like to do exactly the same and I'm so interested in how this goes, I'm contacting everyone now to see if we can proceed just like you.

I will keep this thread updated but please also post anything you get told as a result of your enquiries

One question I have...for the house to be considered 'self financed', does the rental valuation have to be a certain amount above the mortgage/SO Rent payments?

pcgtron

Lots of people and banks I think suggest 125% of mortgage payment if the interest rate was 6% but I'm not sure if this is interest or repayment percent. Mine was about 400 a month over the mortgage, and will drop to 300 over as my rate has just changed. This ison a repay ment

gazfocus

pcgtron wrote: »

Lots of people and banks I think suggest 125% of mortgage payment if the interest rate was 6% but I'm not sure if this is interest or repayment percent. Mine was about 400 a month over the mortgage, and will drop to 300 over as my rate has just changed. This ison a repay ment

Thanks. I think this may be the sticking point.

My mortgage is a repayment mortgage and is £373 per month (inc £20 for contents insurance) and the rent for the shared ownership element is going up to £235 per month in January, making a total of £588 without the insurance.

Realistically I think I'd be looking to expect £595pcm but then baring in mind, my mortgage would be getting repaid, that repayment element should be classed as profit surely.

I can understand the 125% if it's an interest only mortgage but I think that's an unrealistic expectation for a repayment mortgage.

kingstreet

It depends on the lender, but as I've said previously, it's 125% of the monthly mortgage interest, assuming 6% per annum.

gazfocus

kingstreet wrote: »

It depends on the lender, but as I've said previously, it's 125% of the monthly mortgage interest, assuming 6% per annum.

ah, brilliant. Thanks for that. So for a shared ownership, would it be 125% of the mortgage interest AND shared ownership rent or would it be 125% of the mortgage interest and 100% of the shared ownership rent? (lender dependant of course).

kingstreet

That I don't know. I've never tried to do what you're doing.

I suspect the lender will want to cover both. It doesn't make sense not to, TBH.