Moving but keeping the old house - how does this work???

[bamamama]

A question for you wise MNers to settle an argument between dh and I...

Suppose you own a house, with quite a chunk of equity in it.

If you wanted to keep the original house and rent it out whilst moving to a bigger house how would you do this? Can the equity in the original house count towards the new house or, if you had no cash for a deposit for the new house, would you need a 100% mortgage on the new place?? If you re-mortgaged to release the equity in the old house to go against the sale of the new house would you need to make payments for that too?

I just don't know how this would work and need some kindly soul to hold my hand and tell me slowly with no technical terms!

Hi there we have been having similar thoughts about doing this sort of thing. We own our own house - no mortgage and have a BTL flat with about 50% equity...

Need to look at BTL companies who specialise in this. When we approached our bank they said that we would get only about 70% value of house in loan. The rest would have to be in savings. BTL companies on the web will do the sort of thing you are after but it depends mostly on the rent you could get for your own house. Might be worth looking around to see if your house is easily rentable and what sort of rent you might get. We had to rent out our main house as we are overseas for 2 years. We were very fortunate to get US servicepeople who pay a big premium over what normal local rents are.

We have worked out that by putting house on a mortgage and remortaging the flat and with savings we could buy a house slightly more expensive than our home, however as the house we are interested in way overpriced (And the agents have almost admitted this to us!)plus we are in no hurry at all, we are waiting to see if it drops over the next few months even a year...

If you do do this, be very firm over negotiations with vendors...you will be a chain free buyer and I'd start at least 10% below asking price, maybe more

Good luck!!

I did this several years ago. I had a flat which was worth significantly more than I paid for it. I re-mortgaged and released 30% of the equity which I used as deposit on my new house.

When I re-mortgaged I was told I could only release 30% as it would be a BTL.

I went to an independent financial advisor to get it sorted. It wasn't particularly painful.

Lenders will want to know that the potential for rental income will cover the interest of the loan so it is worth getting some estate agents in to tell you how much your home could rent out for. It is also worth getting them to be honest about how rentable it is - not every location/house type will attract tenants.

Then, armed with these quotes, you can work out how much you can remortgage your house for as a BTL (bear in mind that BTL mortgages are more expensive than residential ones and have higher set up costs and the most they lend you will be 80% of value), pay off the old mortgage (or convert it to a BTL or carry it across to your new home) and make up the difference with a new mortgage on your new place.

Your deposit will come out of the money that is released when you mortgage your original home and the extra equity from that will also mean that you shouldn't need a 100% mortgage on your new place. It is worth putting as much mortgage as possible on the rental place as it makes it more tax efficient. Budget for rental fees of at least 10% + VAT pa and voids of 1-2 months before you decide whether it is worth doing it or not.

I am actually a few weeks of exchanging on my new property, and done it in a similar way.

We had our first house and remortgaged that on a buy to let, to buy house number 2. We are now remortgaging house number 2 to use to pay the majority of house number 3.

On the property you are planning to rent you will need a buy to let mortgage, as a rough idea on what they will usually lend you is, the rent has to be 125% of the mortgage payment.

To be honest it would be worth getting a financial advisor tp help you out, as there are goods way of doing this. You should have the majority of the mortgages on the buy to let as the interest you pay on the mortgage can be offset with tax etc.

Remember though by renting out the property you are liable for income tax on the rental and capital gains tax when/if you sell it.

just reading longlegs post abot buy to lets being more expensive to set up, this is definately true.
You obviously have to get valuation done on the buy to let as well as new house, plus double solicitor fees and set up fees for mortgage ours is £1800, and that was good looking at many of the others. Financial advisor said some set up fees can be as much as £3500. So I would do your homework

Thanks all. I'm doing a lot of wishful thinking about keeping our fantastic investment house and getting something bigger - I will do some homework.