Let-to-buy

Chr1stophe

Hi all,

I'm new to this forum so please be gentle with me!

We currently have a mortgage on our home and have about £60k equity and owe £90k. We would like to spend some money on refurbishment including a new boiler, rent the house out and buy a new property and relocate. The new place will be aaround £80k purchase price.

The trouble is, we don't have any savings to cover the refurbishment or a deposit for the new house. We therefore would like to borrow an additional £20k on the current house to fund the refurb. plus the minimum deposit required by the Building Society. After finding a new house, the plan would then be to take out a new mortgage with the new cash as a deposit.

Having spoken with the BS, and spoke of our plan, it became apparent that I had put my foot right in it by even mentioning it. Since I had now disclosed this, they said that they would not even consider lending against our current house to provide the funds we need IF we were intending to rent our current home out. Damn ! The only silver lining was that the BS stated that this issue was only because the FSA scrutinise against this sort of practice and that they were only acting ethically which is fine. They also said that if I were to apply on line, then you might bo OK.....i.e. as long as my local branch don't know about it.....:j

The thing is that we could easily afford both mortgages during times of no rental income and we would get an agent to manage it to minimise this.

I'm not quite sure where to go now and where to start. I'm considering seeing an independent financial advisor but I just thought I'd sound out this forum to see if anybody out there has any advice or has been in a similar predicament.

Thanks

kingstreet

Remortgage current property onto let to buy product. Raise upto 75%, subject to rental income and use funds to repay existing mortgage, do improvements and for deposit on new residence.

New residence - must be no more than 90% mortgage and choose a lender willing to ignore the let property/mortgage as self-financing. Some don't, so a broker to handle these transactions would be a good idea.

First job, contact an ARLA registered letting agent and get a rental income appraisal in writing addressed to you. It will save time later.

Chr1stophe

Thanks for your reply, Kingstreet.

I get points 2 and 3, but not 1.

Could you embelish a little? I understand that to remortgage onto let-to-buy, they will add 1% on top. No problem.

Are you saying that we could remortgage our 90k onto a buy to let. Then apply for additional borrowing of up to 75% of the 150k valued house (up to 112k), then repay 90k mortgage on current house with (up to) 22k left over.

I'm new to all this and than ks again for your reply.

kingstreet

No. You can apply to your existing lender for consent to let. However, as you are finding, they will not lend you more money secured on this property.

1% extra? Nationwide then?

Nationwide also won't offer increased borrowing to cover the deposit on a new residence, so this was a non-starter from the beginning IMHO.

I'm saying you go to a new lender for a let to buy remortgage product. If the rental income is enough, it will lend you 75% of the value of the property. That is used to repay the current mortgage, pay for your repairs and pay the deposit for the new residence.

Pretty much what I said before...

So, a broker appears to be the order of the day.

Chr1stophe

Yes, Nationwide.

The penny has now dropped. You've been really helpful and thanks again.