Any experts around....

spamgarrasequin

Question is, can I re-mortgage my £300k flat to release £150k (circa £85k left on repayment mortgage), convert it to a buy to let (interest and capital) then buy a second interest only mortgage for approx £300k?  I’ve got the affordability criteria but am 52 so can’t take out a second repayment mortgage as it would then be unaffordable.  Is this daft?  Would it work?  I want to live in a nicer property until I retire that’s affordable but this is the only way I can live a commutable distance from work.

[Deleted User]

There is nothing in your initial question that says it wouldn't possible. 
Lenders have tightened up interest only criteria but there are lenders who are good for these cases where downsizing at retirement is a legitimate plan.

Seek out a broker and flesh out the details 

spamgarrasequin

Thank you!  really appreciate your thoughts.  If there’s anyone else that’s done this or has advised, I really would be grateful :-)

Thrugelmir

Why would you want to move a BTL mortgage onto a repayment basis? 
Might as well have your residential property on that basis. As assume the BTL will be cash generative after costs, provisions and tax. 

ACG

Why not sell up and just port your existing mortgage tot he new property? 

spamgarrasequin

Because I want the additional asset

AdrianC

spamgarrasequin said:

Question is, can I re-mortgage my £300k flat to release £150k (circa £85k left on repayment mortgage)

So £235k, 78% LtV.

convert it to a buy to let (interest and capital)

You're unlikely to get CtL on a newly-remortgaged property, so just remortgage straight to a BtL loan. But you're pushing upper end of affordability.

then buy a second interest only mortgage for approx £300k?

So buying a £450k property. With the +3% SDLT, that's £26k in SDLT straight off.

Do you have any idea of the size of mortgage monkey on your back...?

First off, interest-only residential is unlikely, so let's make the BtL interest-only. Let's say £235k @ 3.5% interest only = £690/mo. £300k @ 2.5% repayment = £1,346/mo. That's £535k borrowed, over £2k.mo straight back out...

How's that monkey being fed...? What's the numbers on the property letting business you're looking to start? With that big a mortgage on the let flat, I'd lay odds that after tax (and I'm presuming you're 40%, if affordability of £2k of mortgage/mo is no issue) and all the other realistic expenses (including management, given distance is your logic), then you're doing no more than paying off the interest every month - and probably subsidising your tenants slightly. 

I want to live in a nicer property until I retire that’s affordable but this is the only way I can live a commutable distance from work.

So... Let's assume you sell the existing flat.
You now have £215k equity. If you like the £450k property, why not just buy that? That's only a £235k mortgage, and you'd be saving £13.5k in SDLT. Monthly outgoings, change over one grand repayment. Life, much simpler. Savings and investments, beefier.

Comms69

spamgarrasequin said:

Because I want the additional asset

What asset, at the minute it's just a massive liability.

spamgarrasequin

the rental income will produce circa £1300 a month so the £700 over and above the interest only mortgage will subsidise my other payment (once tax and fees is considered).  The idea is to sell both when I retire and I’m not afraid of debt.  Just want to know if it’s possible.

eidand

spamgarrasequin said:

the rental income will produce circa £1300 a month so the £700 over and above the interest only mortgage will subsidise my other payment (once tax and fees is considered).  The idea is to sell both when I retire and I’m not afraid of debt.  Just want to know if it’s possible.

even I know ( an a non-lender ) that nothing is as straightforward when it comes to lending, you will have dead periods of no tenants, problem tenants,  possible court visits to evict tenants, legal costs, repairs, refurbishing and so on and so forth. Relying on that income to pay your interest-only mortgage feels like a disaster waiting to happen. But what do I know, I am sure someone else will point out other things,