Advice on using equity on current property

ShaunX

I would like some advice on how best to use the equity in my property.

Basic details:

Property purchase price - 274k
Mortgage outstanding - 214k
Foxtons valuation (as at Aug 2014) - 450k
Initial mortgage period ended Oct 2014 - rolled to standard 3.49% rate


Let's say there is 200k equity. What are my options? I would like to utilise this somehow - potentially as a deposit for a 2nd property. For a 25% BTL mortgage I'd need around 75-100k.

I'm with Woolwich and there is the option of Additional Borrowing as well as Remortgaging. I have some basic questions:

1. Would Woolwich lend me additional cash on my current mortgage if the reason was for reinvestment? How difficult would it be to get the cash for 'other reasons'.

2. If I remortgaged to a 75% LTV - would the lender give me the full 75% of 450k valuation, which would be 120k excess over my outstanding mortgage, or would they only lend me up to my outstanding mortgage (which would be about 50% LTV)

3. Assuming I receive 100k - will the lender of the new BTL mortgage on the 2nd property have restrictions on the source of deposit? i.e would they ask where the deposit came from and reject an application if they know the deposit money is coming from a remortgage of another property?

4. Do I have to get a BTL mortgage for the second property?

I understand that I need to be careful to ensure I can afford the additional mortgage payment on my current property and that rental on the 2nd property covers the mortgage on that, or that I can cater for the shortfall and periods of vacancy.

I'm looking for advice more on the mechanics of this situation. Much appreciated. Thanks.

dimbo61

You are trying to buy a BTL property with a BTL mortgage so you need to start with a whole of market mortgage broker who deals in BTL mortgages/Loans.
They will look at your income and savings/equity to see if its possible

Hoploz

You haven't said anything about your income above. That's fine, I don't need to know, but your broker will need to use this to work out how much you can borrow on your main home. Just because there is equity doesn't mean a lender will give you a certain percentage. It will all depend on affordability.

The BTL property will require the figures you suggest - 25% deposit with the rental income covering 125% of the repayments - but these days the lender will still require evidence of income to cover this if it is left unlet, so your broker is indeed the best place to start.

ShaunX

Thanks. That makes sense that the lender will only agree to lend up to a certain amount. My gross salary is 75k.