Mortgage options for expanding portfolio

Simon198335

Hi,
My wife and I recently married and have 3 properties in the north and 3 mortgages between us. 2 of the properties are rented out and the third is our current home.
We are looking to upsize and start a family but would like to keep the current ‘home’ and rent that I out too to supplement our income and subsequent new mortgage.
We both have fairly good salaries and approximately £125k in equity across the 3 properties with rental income more than covering the remaining mortgages.

Can anyone offer any advice? Can we use the equity as a deposit on the new home?

LRmortgage

You’re probably best to use a Broker now.
The more properties and mortgages you have, the more difficult it will become. Especially once you are classified as a PRA Portfolio Landlord.
You will need a Let to Buy mortgage for what you want to do now, a Broker is best placed to help you with that.

Thrugelmir

Simon198335 wrote: »

We both have fairly good salaries and approximately £125k in equity across the 3 properties with rental income more than covering the remaining mortgages.

Can anyone offer any advice? Can we use the equity as a deposit on the new home?

Equity doesn't fund mortgage repayments. Cash does. The important numbers are debt owed, income. Your ability to fund outgoings in difficult financial circumstances. Also in a climate of rising interest rates.

Simon198335

Hi Thrugrlmire,
Thanks. The repayment of the mortgage is not so much an issue.
What I was hoping to find out was if we could use existing equity to bolster the deposit. Thus reducing the ‘dept’ and repayment sum.
Hope that makes sense?

Thrugelmir

Simon198335 wrote: »

The repayment of the mortgage is not so much an issue.

To the lender it is. No tenants = no income. Not just a mortgage to meet but other costs too. Likewise if interest rates were to rise in the future. An unencumbered property generates free cash flow.

Leveraging up with debt is where many came unstuck in the BTL boom of the early 00's. As double edged. Greater reward but also greater to fall. Lenders may well be cautious of borrowed deposits likewise releasing equity for the purpose.

TrickyDicky101

You can raise a BTL mortgage on your existing property (or properties, if your equity is spread across your entire portfolio), however, the existing mortgages will need to be repaid and BTL limits the % of value you can borrow. This is why talking to a broker experienced in such activity is probably a good idea.

You will also likely need to factor in the 3% surcharge of SDLT on an additional property on your onward purchase as you are not replacing your residential property.

butterflybook

It is possible usually to use the equity up to a certain % of the value to fund a deposit - some lenders do not like to lend to purchase further properties but there are lenders out there which will.

As others have said it is best placed to engage with a broker at this point