Can i do this?

[reeko]

I have a cunning plan, but I have a sneaky feeling there is a fatal flaw in it that I just can't see. A while ago I re mortgaged and at the same time released some equity in the flat. I had been hoping to use this for an extension, but it looks like planning will be refused.could I use the equity towards a deposit for a new gaff, and rent out my flat?

[womanofdulwich]

maybe its against the terms of your current mortgage to let out the property?

[red devil]

If it's not a specific Buy To Let mortgage that you currently have, then you will need to get permission from your lender to rent out the flat, otherwise you could be breaking the terms of your mortgage.

If it isn't a BTL mortgage and they won't agree to renting it out, then you should try remortgaging with a BTL mortgage lender.

Another option is to use the equity as a deposit to buy another flat on a BTL mortgage, rent the new place out and stay in your current flat...

[reeko]

So if I managed to get a btl mortgage, then it is a goer? Staying not the best option, getting cramped and hopefully even more cramped in the future, hence the need for more space.

cheers all.

[Loz]

Fairly standard approach, really. Switch to a BTL mortgage, release as much equity as they allow (usually you'll need to keep a Loan To Value of about 75%) and use that to finance a new mortgage on a new home. BTL interest rates are a little higher than normal mortgages, but that interest is tax deductible (as is repairs and other costs).

[KidKruger]

Reeko if it was me I would do it, but I would never advise anyone else to do it because that's just sooo irresponsible. But don't forget your deposit is really debt, not liquid cash, so be very clear about what you can afford monthly and remember - rates are low, what are you gonna do when they're up by 2% ? Do the calcs. Rates will rise and when they do it'll be carnage. There'll be a lot more renters after that.

[StraferJack]

Exponential Leveraged debt. What could go wrong?

If you need to move to bigger, why not just sell and use proceeds?

[reeko]

That is also an option. my preference is to stay put, but no extension means that is off the cards as a long term solution. Hearing you loud and clear about taking on too much debt, I am pretty risk averse in that department so will be doing my sums on a worse case scenario basis.

Kk, I think you have highlighted the flaw in my cunning plan, essentially, the second mortgage would be 100%, which is a risk.

cheers all

[Loz]

Actually, in this climate, almost impossible. Anything over 80% is difficult to get a mortgage for.

[reeko]

No I think what kk meant was the deposit is debt as well as the mortgage, so even if I had a 20% deposit, it is all still money owed to the bank.

[KidKruger]

Correct.

Anyway, it's actually possible to collateralise to obtain a 100% mortgage, should you wish to create the impression of full debt on a property, but its not a regular product and certainly not from High St. banks.

[red devil]

Have a chat with a specialist mortgage company, these guys have been helpful to me in the past...http://www.mortgagesforbusiness.co.uk/

They will go through all the various scenarios and give you an idea of costs. As has already been mentioned, it's wise to factor in a future rate rise, say 2% over the next 3-5 years.

Another option you could consider is to buy a place that needs work/modernising, fix it up, and sell it on Sarah Beeney stylee*...

*Unfeasibly large mammaries optional

[reeko]

Cheers Red Devil, I think this is one of those rare occassions that I will fork out for professional advice instead of simplying determining my whole course of action based on recommendations from the forum - a suprisingly successful formula.

Whilst I may be equipped with the mammaries, I don't have the appetite for a big building project right now.

Reeks

[Jeremy]

reeko - this is exactly what we've done. We simultaneously changed our existing mortgage to BTL and took out a new mortgage on another place. Banks are quite picky about giving out BTL mortgages, so as well as having to satisfy the stricter-than-usual LTV ratio, they want to see that the rental income is going to cover the mortgage with a decent amount of "buffer".

It wasn't our first choice, but a problem came up when we were selling our place, so thought we'd give the rental thing a go for a while.

[red devil]

Jeremy, what was the LTV ratio you managed to get? The last time I looked into it, it was in the region of 60%. Just wondering whether it's eased off a bit..

[Jeremy]

Will PM you...

[*Bob*]

Weed of doom, Jeremy?

[reeko]

*Bob* how dare you call Jeremy a weed of doom. He has been most helpful.

[Jeremy]

I've been called worse.

[Loz]

red devil Wrote:

-------------------------------------------------------

> Jeremy, what was the LTV ratio you managed to get? The last time I looked into it, it was in the

> region of 60%. Just wondering whether it's eased off a bit..

We got 75% in August last year.

[Demi9]

Hi,

Sorry to jump in on the conversation. Just wondered I was told you can not change a residential mortgage to a buy to let if it is in negative equity? Is this right?

Thanks