Planning on letting my current property and buying a new one

[gmh1982]

My current property has been on the market some time and is what would be classified as a first time buyers which is where my problem lies - as there seem to be no first time buyers!

What I am looking at doing is keeping my current property and remortgaging it in order to raise the deposit for a new property. I want to rent/let out the house I will be remortgaging (the rent should cover at least 85-90% of the monthly mortgage payment) and move in to the new one. (I hope this all makes sense!?!)

My current property is worth 120k, and I owe in the region of 80k on the current mortgage.

I would be looking at releasing a minimum of 25k hopefully 30k for a 210k property which would become the family home.

The problem I have is that I am somewhat of a propety idiot in that I have only purchased one property before, I have no idea whether this would be classified as a buy-to-let? or the approace I need to take - do I say it's home improvements etc etc

Any help would be hugely appreciated

[Adam Long]

Your biggest problem is that you can, in theory, only have one residential mortgage at a time so one of the properties would need to be a buy to let mortgage. There are ways to tell the lender that you need 2 residential mortgages such as you are buying a second home but this is in theory mortgage fraud as you are not actually doing this - you make the call.

You could ask your lender for consent to let once you have completed your "home improvements" but this normally results in either or rate increase or a change to a buy to let lending - neither of which are really what you want.

As regards the finance, if you want a BTL mortgage the rental cover needs to be 125%-130% depending on the lender so your 85% to 90% is way short of this.

You will be unlikely to get 25k-30K out of the existing property as normal maximum lending is 80% so £120k x 80% = £96k just £16k more than you already have borrowed.

If you cannot sell have you thought of a delayed completion deal which are being offered in some areas now as this may resolve your problems ?

[gmh1982]

Hi Adam, thanks for the advice, as stated I am a complete novice when it comes to this sort of thing so your response was much appreciated.

I was considering putting this property fully in my partners name and then solely purchasing the second property myself and as you put it getting the remortgage for "home improvements". It is her mother that would be moving in to/renting this property anyway.

In answer to your question, no I have not heard of the "delayed completion deal" could you elaborate...?

[Adam Long]

No worries glad to help

1) If you are putting the property in your partners name just ensure that this works for your lenders affordability calculations as you must tell them that this has happened
2) If your partners mother is moving into the property then a delayed completion would not work anyway. In a nutshell it is a person giving you the equity on a house and exchanging contracts and just servicing your mortgage until they complete in the future when lending is more available.

[glen_jai]

Don't forget, if you re-mortgage your existing house, your repayments will go up significantly. So even if they let you re-mortgage up to 95% of your property value, you must check that you'll be able to afford both the mortgage on your existing property and your new property at the same time.

BTL mortgages are generally a good 1 - 2% higher in interest rates than residential mortgages, so something to calculate into the situation.

Cheers,
Glen