Help with a calculation

londongirl

I think i am being particularly dense but i just can't work this out.

If , for example, i had a property worth £150k
With a mortgage of £55k

I wanted to rent out the property, and needed to remortgage on a buy to let releasing some equity to buy a bigger property to live in. I would get a 75% mortgage on the BTL property - which would be £112,500.

Therefore, i was thinking that would mean i could release £37,500 to put as a deposit on another property? But actually does it mean that £37,500 would be the deposit i needed to keep in the buy to let flat?

In which case how much deposit would i have to buy the place i'm going to live? So confused!!! (maths never my strong point but trying not to mess up with this!)
TIA

pathtofreedom

So if the house is worth 150, you want a mortgage for 112500 so the difference between 112500 and 150 which is 37500 is your 25% deposit in a way to be able to get a deal with 75% ltv on your current place.

So if your current mortgage is 55k, and you're borrowing 112500, that means you need 55k to pay off your current mortgage, and you get 57500 to keep and use on a deposit somewhere else. (112500 - 55000 = 57500)

If you only need 37500 you could get a btl mortgage with an ltv of 61% (55+37500 = 92500)

For btl most want you have a monthly rent of 125% of your mortage payment. So if your payment was £100 you need to be able to rent it out for £125 a month minimum to go towards the extra costs of being a landlord.

If you do rent your current place out have you factored in all the extra costs for landlord insurance, repairs, times it is empty with no money coming in, tax and capital gains when you sell etc etc.

btl is a business so you'll need to get a lot better at the maths side to see if it is even worth doing to make a big enough profit. As even if the house goes up in value you could still end up with captial gains tax to pay on that when you sell.

dimbo61

You also need the money for fees ! To set up the BTL mortgage.
Having a £112,500 mortgage on a property worth £150,000 might mean the figures do not stack up.
Rent verse mortgage costs

dimbo61

You also need the money for fees ! To set up the BTL mortgage.
Having a £112,500 mortgage on a property worth £150,000 might mean the figures do not stack up.
Rent verse mortgage costs

londongirl

Thank you - I'm not that terrible at maths just got really confused as with this , so it's better than I thought. I've done the maths on the renting out part and knowing that I had to get 125% of the mortgage covered. Interest only mortgage would be avoid £470 and it would rent out for about £700 / £750 . Although one in my block has just gone up for rent at £850 but that's with foxtons and think they are taking the mic!
As long as I broke even that would be fine - would be banking on prices rising on flat ( in nw London) faster than where we would be looking to buy ( out in sticks of bucks or herts) hence wanting to keep the flat as an investment if poss. And partly for my security - lived here on my own for 6 years, no one ever thinks they will break up with partner but it happens so it would be security at back of my mind just in case it all goes wrong. Honestly don't think it will but then I didn't think my ex would cheat on me - stuff happens!

Thanks for replies, things may be better than I thought financially then it seems

londongirl

Sorry thank you also re the capital gains tax reminder - I think if I have it correct that if I keep the property for 5 more years say, and I've lived in it for 6, you also get another 3 years free so 9 years would be excempt out of the 11 years so I'd only pay capital gains on two years worth of increases.?