One for brokers/mortgage experts

joAnn

Hello All, 
Looking for options to release equity - if at all possible,  and put this towards a deposit for a bigger home.  My circumstances are:
I have a 2 bed London flat in decent enough location. Outstanding mortgage approx £72,000. 2nd charge - 1/3 value of sale price, minus added value from renovations I made. (£30000?)

1. Purchase price - £226000
2. Current estimate value - £475000 ( based on next door flat for sale, which does not have direct outside space, and offers a kitchenette)
3. Rental income £1200pcm - currently rented to a friend on mates rates, but could achieve £1500 - 1700.

My salary and tax at the last analysis were pretty low - Annual income for lat three years, approx £8000 from work and child benefit, Tax paid was £950 since 2014. I am currently self employed, but since my last tax return, my wages have increased and I was also offered the opportunity of a permanent position before lockdown came in, the offer would still be available.
My husband is a higher earner, and would pay the mortgage on a bigger home.
Any ideas on this? I don't want to get in touch with a broker as yet, just mulling over my thoughts and options.
Many thanks for any input

haras_n0sirrah

Hi
Assuming you are buying to live it is going to come down to affordability on the onward purchase
With the second charge are you able to explain a little more - is it with someone like castle trust? Is it 72k + 1/3 of value - 30k so 200k outstanding on the property at the moment?

joAnn

Thanks for your response. The second charge is with a housing association. The payback is only once sold, or 1/3 of current market value. No restrictions around the second charge on remortgage. I think my initial thought process is about how much I can release will determine the cost of the new place (to live in). On your calculations, I think it would be approx £170, 000 - £200,000 outstanding (can't recall how much they will allow for value I added on renovations).
Thank you again

joAnn

Bumping my post 

getmore4less

Are you allowed to rent the place out, do you get to keep all the rent?
4% gross yield not that hot. but if you get to gear the 1/3 in your favour that helps.
By the time you factor in the extra SDLT on the new place it is going to take some time to return to profitable status on the flat.
what is the  payback calculation?
if we go with you get to keep your uplift they get 1/3  it looks like your share is 475-(475-30)/3= 327
If you could get 75% of that would be total lending of £245  take off the £72 leaves  £173 new money to take forward.