Buy-To-Let mortgage deposit

principlecounts

I'm toying with the idea of a buy to let mortgage if my property doesn't sell. Clearly I have a lot to read up on, and I have signalled the idea to my mortgage advisor.

Going by today's market, I have about 32.5% (worse case) of equity in my property, can I use this as a deposit?

caronoel

Do you mean a Let to Buy mortgage, where you intend to let out the property you currently own? Or do you want to free up equity in your current home to use as a deposit on a BTL?

In either case, a deposit of more than 30% should be plenty. There are deals out there now for deposits of as low as 20%

eddddy

It's not completely clear what you want to do... I'm guessing:

- Remortgage your current property for BTL and
- Buy a new property to live in
- With just the 32.5% equity in your current property
(Or do you have savings as well?)

So if you remortgage your current property at 80% LTV (i.e. 20% equity)...
... that leaves you with 12.5% of the equity as a deposit for the new property (less SDLT, legal fees, mortgage fees, moving costs etc)

It sounds a bit tight. You probably have to go through the figures very carefully.

principlecounts

Thanks folks, I don't understand the figures fully, I was just wondering at first if I could use the equity in my property could be used as deposit. Seems like I can. But judging by things it won't leave much for somewhere to live myself. I'm having a chat with my mortgage advisor later this week.

I'm in this situation because selling my property is proving tricky, and this route may workout better as the rent rates are a bit on the high end.

Thrugelmir

principlecounts wrote: »

I'm in this situation because selling my property is proving tricky,

Drop the price.

principlecounts

Thrugelmir wrote: »

Drop the price.

That is an option, still seeing if it's worth it. Spoke to my mortgage advisor, it's actually a Let-to-Buy Mortgage I need. #gettingcomplicated

kingstreet

Please confirm if this is a let to buy transaction with you becoming an accidental landlord, with the new purchase being your new main residence.

principlecounts

@kingstreet.

Reading around the subject, it looks I'm going to be an accidental landlord, as described in your post. My mortgage advisor has briefly described this to me, but I'm still not clear how the finances will work, it feels I may have to dip into savings Is it any different (financially) from a Buy-To-Let? I remember the mortgage advisor saying about mortgage lenders would need to keep at least 15% in equity to deal with any issues while the property is rented out, which is understandable. But we were just playing out different options on a way forward. I'll find out tomorrow though, as I've signalled an interest in a new property.

I might start a new thread on Let-To-Buy as there seems to be very little first hand experiences documented.

kingstreet

The rules are the same as they are for BTLs.

You'll typically need 25% equity in your property and for the rent to be 125% of the monthly mortgage interest, assuming a rate of perhaps 6% per annum.

If purchasing a new residence, you will need a lender which will ignore the let property and mortgage as self-financing for your residential mortgage, otherwise you may find affordability is affected if the lender deducts the cost of the mortgage on the let property.

Kynthia

Don't start a new thread, we have too many at the moment.


Think seriously about whether you want to become a landlord. It is work and responsibility. You have to be able to afford to cover both mortgages if your property is empty or your tenant stops paying rent. Your property wasn't bought with the intention of being a rental, does it get a good enough return? There are many things to consider.

principlecounts

Had a chat with the mortgage advisor today. We're going to remortgage our current property, to obtain a mortgage for our new property. It's a moving target...