Mortgage options

No_place_like_gnome

Hi everyone,

I'm new on here but have seen posts and advice given and wondered if someone can help me.......

I live with my partner but have a property myself which I lived in before meeting my partner. I currently rent this house out.

I am looking to purchase a property for my partner and I to live in and can see two options:

1. Sell my tenanted house, use the equity as a deposit and obtain a new small mortgage.

2. Retain the tenanted house as a let to buy and use the equity as deposit on a second home (more of a long term plan really to retain this as an investment property).

Now, I'm struggling to understand how option 2 might work financially. If I give some figures, can anyone help me work out what my monthly payments would be (for both properties)?

Tenanted house value - £150k
Mortgage outstanding - £30k
Rent - 600pcm
Currently mortgage payments - £300pcm

Purchase price of second home - £180k

At the end of the day I don't want to be a slave to a mortgage, but equally need to consider all options and am going round in circles in my head!

Any help would be greatly appreciated!

Thanks

ACG

Option 2, generally speaking you could borrow approx £95k against that property. Usually it would be up to 75% of the value of the property but 9/10 there is a rental calculation that also needs to fit (typically this is the rent needs to be 125% of the mortgage payment based on an interest rate of 6% on an interest only basis).

Doing some quick maths I get that to be approx £95k - so that would give you £65k to put down on a new property.

Your incomes would then need to be enough to support any further mortgage you need - typically speaking this is around 4-4.5x your income you can borrow on a normal residential mortgage.

ethank

If you don't want to be a slave to a mortgage, best way is to sell up.
If you keep the house as a BTL, you will still have an investment - but you will also need to invest in it in the future, maintenance etc.

No_place_like_gnome

Thanks both for your advice. It's been a long time since I bought property and am grateful for all help received :-)

kidmugsy

remember CGT on the house you let.