Buy to Let remortgage and equity release

adsbodey

Hi All,

I am exploring the option of possibly taking out a buy to let mortgage against my current property and renting it out when I purchase my next house with my girlfriend.

My flat is currently valued at £185,000 and I have a £100,000 mortgage.
What equity would I be able to release here as a ball park figure.

My basic salary is £70,000 and my girlfriends basic salary is £32,000

Many thanks in advance for any support.

Adam

Slithery

Usually around 75% LTV is required for a BTL mortgage.

So maybe around £40k?

theartfullodger

Who's name is on the deeds and current mortgage - just you or you & g/f??

Have you been a landlord before? It's a bleedin' minefield: Most years I make money from my rentals, but not always.... 

SDLT_Geek

adsbodey said:

Hi All,

I am exploring the option of possibly taking out a buy to let mortgage against my current property and renting it out when I purchase my next house with my girlfriend.

My flat is currently valued at £185,000 and I have a £100,000 mortgage.
What equity would I be able to release here as a ball park figure.

My basic salary is £70,000 and my girlfriends basic salary is £32,000

Many thanks in advance for any support.

Adam

Many people would call this "let to buy", not "buy to let".

Have you factored in the additional stamp duty?  If you are buying in England that would be an extra 3% stamp duty land tax on the price.

adsbodey

Thanks all, I'll try and answer the questions one by one:

- yes I've factored in the +3% stamp duty

- currently the flat is owned by me and in my name

- my girlfriend will be buying into my flat and getting put on the deeds before the next house sale (this is so that she can use her life time ISA without penalty as next house will be over the limit.
- After this we are hoping to "let to buy" - apologies for the wrong phrase

- I've not been a landlord before but I've rented out vehicles in the past, I'm also very handy and can repair most things myself 

So, the general consensus is releasing £40,000 equity from my flat then?

Many thanks once again 

Adam

eddddy

adsbodey said:

So, the general consensus is releasing £40,000 equity from my flat then?

Just to explain that in a bit more detail - you'd probably have to repay your existing £100k residential mortgage.

But you could take out a new BTL mortgage. The max 'loan to value' on a BTL mortgage is usually 75%.

So if the bank agree that your current flat is worth £185k, they might lend you a new mortgage of up to about £139k.

So you'd end up with an extra £39k in your bank account.

But you'd have to pass all the affordability checks as well, to get the full £139k (plus a residential mortgage on your new place). You'd need to talk to a mortgage broker about projected rent, your income, your outgoings, your credit history etc, to see how much you might be able to borrow.

_Sam_

We did this when buying a new house just now, let to buy on existing property and used the equity to add to the deposit on the new property. From what I understood from our mortgage broker, for the let to buy/buy to let mortgage your salary is irrelevant, the lenders look only at the projected rent. It is for the house you will be buying as your new residence (so you'll have residential mortgage there) that the salary and outgoings are relevant. Mortgage broker was really useful to us as we did both mortgages as part of one transaction so to speak.

caprikid1

I would also add I did the same and was already a landlord at the point and I struggled to get anywhere near that figure.

To start with they valued the property quite poorly IMHO, but even at that valuation I achieved about 55% LTV.

I had a good salary, proven track record as a landlord, Interest only mortgage £300 Rent £1250.

As has been mentioned , I often feel the amount of money tied up and the subsequent mortgage I now have and tax I pay to be hardly worth it some years.

dimbo61

Most if not all BTL mortgages are via mortgage brokers !
You need to do lots of research before heading down this road.
Is this a good plan ?
Would putting down £85,000 on your joint home together be a better idea and get a better rate ?80/75%LTV ?
As for being a Landlord 🤔 
Your a higher rate tax payer 
Do you understand what is involved ?
EPC EICR GSC Fire safety and security
PAT testing, right to rent, how to rent, deposit, tenancy agreement.
Watch a few episodes of Slum Landord, Nightmare Tenants
New rules about S21 and Fit for habitation, Decent homes standards are also in the pipeline.
Maybe putting more into your pension, ISA,s etc

adsbodey

caprikid1 said:

I would also add I did the same and was already a landlord at the point and I struggled to get anywhere near that figure.

To start with they valued the property quite poorly IMHO, but even at that valuation I achieved about 55% LTV.

I had a good salary, proven track record as a landlord, Interest only mortgage £300 Rent £1250.

As has been mentioned , I often feel the amount of money tied up and the subsequent mortgage I now have and tax I pay to be hardly worth it some years.

Thanks for this, so as i understand it, i'd need to pay 20% tax on any profits made from the rental (i.e. in addition to the Let to buy mortgage amount)

Thanks once again

Adam

adsbodey

dimbo61 said:

Most if not all BTL mortgages are via mortgage brokers !
You need to do lots of research before heading down this road.
Is this a good plan ?
Would putting down £85,000 on your joint home together be a better idea and get a better rate ?80/75%LTV ?
As for being a Landlord 🤔 
Your a higher rate tax payer 
Do you understand what is involved ?
EPC EICR GSC Fire safety and security
PAT testing, right to rent, how to rent, deposit, tenancy agreement.
Watch a few episodes of Slum Landord, Nightmare Tenants
New rules about S21 and Fit for habitation, Decent homes standards are also in the pipeline.
Maybe putting more into your pension, ISA,s etc

Thank you.  So how would the tax differ?
I pay tax on my basic salary of 70,000 and then an additional 20% on any profits made from rental?

Thanks again

Adam