Question on re-mortgage to allow equity release to buy another home.

[Deleted User]

Hi, I have a query and until I speak to a broker I'm not sure exactly how it works so thought I'd ask on here to see if it would be feasible.

Basically I own my property and have an outstanding mortgage balance of say £135,000, the house would be valued around £325,000 so basically have about £190,000 equity roughly, also I've checked the local rental markets and I could get approx £1350 per month in rent, on my current mortgage I pay back about £730 per month.

Now I've seen a very nice property for sale at £330,000 and I've been thinking about it, so I'm wondering if I could say do something where I can re-mortgage mine so I could release some funds to allow me to buy this second home and then on my existing property I could then rent it out.

Is this even feasible? If so what would be my first approach, would it be to a broker?

MWT

Yes, talk to a broker, they can help you figure out what you could afford using a Let-to-Buy product for your current property.

Not sure if the numbers will for for you though, as it looks like you'd end up needing a residential mortgage on the new property for around £220k...

Do check if there is any ERC to pay on your current mortgage if you pay it off early with the Let-to-buy product replacing it...

... but talk to a broker and they'll figure it out with you.

housebuyer143

As above. Yes that's very standard but you need to factor in the 3% extra stamp duty. Most BTLs are interest only so your payments would be much lower than your current resi mortgage. 
What they lend you depends on the rental you can achieve more than your income

[Deleted User]

Thanks for the pointers, yep I’ll try and speak to a broker and see if they can come up with something.

amnblog

With a following wind you may be able raise £100,000 on your current home. This can act as a deposit for the new home.

Remember that this arrangement will add to the purchase tax on the new home to the tune of 3% of the purchase price.

Definately, a case you need an experienced broker for.

Thrugelmir

Do you have any savings/capital to inject ? In simple terms currently you owe £135k and will require £330k to purchase the 2nd property. You'll therefore need potentially to service a debt of £465k if the let property generates no income for a period. Is that mangeable? 

Only the interest element of your current mortgage is an allowable offset against tax. Tax will erode the return generated on letting the property also maintenance costs etc will need to be factored in.