In our latest Q&A we hear from a couple who have found a dream home but can’t shift their current property. David Jackson of Prestige Private Finance offers his advice…
The Question
We have been trying to sell our house for nearly a year and have had no luck. Meanwhile, we’ve found our dream property and are considering renting out our current home for a year or two before putting it back on the market.
Could we take out a residential mortgage to purchase the new property and transfer our old home to a buy-to-let mortgage? What would we need to consider?
David’s Answer
Yes, this is a scenario known as a ‘let-to-buy’, where you convert your current property to a buy-to-let mortgage and take out a new residential mortgage to purchase your new home. This approach can work well if the numbers add up.
There are a few key points to consider:
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Releasing equity
You won’t be able to release all the equity from your current home. Lenders typically require you to retain a certain amount of equity in the property, which may affect your budget for the new purchase.
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Rental assessment
The amount you can borrow on the buy-to-let mortgage will be dictated by the rental income your current property can generate. Lenders usually lend up to 75% to 85% of the property’s value, but this is also subject to a rental stress test, which have become more stringent in the current market.
If the rental income is sufficient and the equity release works for your needs, a let-to-buy can be a viable solution.
However, it’s crucial to get an accurate assessment of the rental market and work closely with a mortgage adviser to ensure this approach aligns with your financial goals.
Meet our expert…
David Jackson established Prestige Private Finance in 2014 after nearly two decades in the mortgage industry. With experience in London’s high-net-worth areas, David and his team offer empathetic and expert advice for your financial journey.
If you have a question for David please email kate.saines@emap.com or leave a message in the comments below.
