Is renting our current flat out an option if we want to buy a house?

meejaboy

Hi all,
First time poster, so please be gentle...
We've got an issue with our flat, where we've been at odds with a roofing company for over a year now. This is stopping us selling our flat, because it comes up on the survey (we actually tell people the situation before then, because we feel that's only fair).
Since we're having trouble selling the flat, we thought it might be a good idea to rent it out and buy a new place. We're on the second floor, so those roof issues on the 4th floor won't affect our renters at all.
If we have:
£170K left on our current mortgage
Around £300K-£305K equity in the property above that
A combined salary of £95K (thank god my wife has a proper job!)
Savings of around £35K
And could expect to rent the property for £1,200-£1,300
What could we spend on a new property?
It took our building management company a year to choose the builders, and we've been in dispute with them now for a year. We're really keen to move out and get a new place, and think this might be our best option. Any suggestions?

OUNN

You could remortgage your flat on a BTL basis releasing some equity, and then take out a residential mortgage for a house using the equity released plus what you've saved as a deposit!

Bare in mind though that if you do it this way you will be liable for the extra stamp duty surcharge of 3% because this will be your second property!

But........ Will a BTL lender lend on your property if lenders won't lend to purchasers?

Just noticed you've asked what you could look at house wise. If your flat is valued at about 470k.
You could take equity out to a maximum of about 180k. What you've saved will probably be eaten up by stamp duty etc, and you may be able to borrow 4-4.5x your combined salary, circumstances dependant. But one of the brokers will be able to give you a better idea than me!

Thrugelmir

meejaboy wrote: »

What could we spend on a new property?

Turn the question around. Given the relative high value of the flat. What would you need to borrow to fund the purchase of a house?

Given you've only £35k in savings. A high % would be eaten away in 2nd home stamp duty.

What impact is the "roof issue" going to have on the value of the property? Is there a potential liability to be settled?

meejaboy

Thanks for the advice so far.

The roof issue shouldn't affect the value. The roof itself is now watertight, the issue we have is that cosmetic damage was caused by the roofers to the building and they're asking for high extra fees to repair it. We're not paying that, given that they caused it, and are about to start legal proceedings. If we sold the property we would do so with an indemnity clause, so buyers were not left out of pocket by that process.

As an update, latest figures show we have £158K remaining on the flat mortgage. What does a broker think we could raise for a new purchase?