In this section we’ll cover how much you can typically borrow on your residential property when you refinance it onto a buy to let mortgage. We’ll discuss your options going forward – purchasing your new home as well as some of the lenders’ views on the various elements of this transaction.
Remortgaging Your Home Onto A Buy To Let
The first thing to raise here is that if you aren’t looking to raise any extra money on your existing home then you won’t always need to remortgage it onto a Buy To Let Mortgage. In some cases your existing lender will grant ‘consent to let’. Your mortgage deed is unlikely to allow you to rent out your residential property unless you ask for this consent. If your lender declines to give consent or if you need to raise additional money then you will need to change onto a buy to let mortgage product.
Loan To Value Available
Typically you will be able to raise 75% (three quarters) of your current property value as a buy to let mortgage. So if you currently owned a property worth about 200,000 and had a mortgage of 100,000 you would be able to raise an extra 50,000 to use as deposit on your new home purchase (as long as enough rent can be achieved to cover this).
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Rental Cover Required
The amount of rent required does not need to be proven using an existing rental agreement as naturally you haven’t moved out of your property yet. Instead the valuer will be asked to confirm the estimated rent. A typical calculation might be 125% at the mortgage rate. So if that were 5% for example a 150,000 mortgage would require rent of 781.25 per month.
Deposit For Your New Purchase
Typically at least 10% deposit will be required for your new purchase. It’s worth bearing in mind that better rates are available to applicants who are able to raise a larger deposit than this so you will need to discuss with your adviser the balance between raising the right amount on your buy to let and achieving the best rate on your new purchase.
Due to the popularity of this type of mortgage most buy to let lenders will consider these cases now and most residential lenders will support your new purchase. There are some exceptions, however, for example Coventry will not allow the remortgage of a residential property onto a buy to let and Nationwide heavily restrict the availability of new purchase mortgages to applicants looking to do a let to buy transaction. For this reason it is important to take advice or thoroughly discuss your plans with the lender before you proceed.