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Home mortgage to BTL


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Hi everyone, I have been following the forum for sometime, learnt so much and continue to do so! Please continue the good work, now to my predicament ....

 

I bought my house three years ago for £150,000 it’s now worth £200,000 and have £72,000 mortgage but I am now planning to move in with my girlfriend. We are also planning to start property portfolio. So we want to take equity out for down payment and also change my current home to BTL. But we are not sure whether to take the equity out first and then change it to BTL or we need to change it to BTL first (would 6 months rule apply here before we can take money out?)

 

We are not sure which comes first, would love to hear from far more experienced investors as the strategy you would use if you were in our position?

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Hi Jonathan,

 

it sounds like you simply need to re-mortgage to a BTL product.

For example, if the lender agrees that your current home is worth £200k and you met all their criteria for a 75% loan, you could get a mortgage for £150k.

You'd use that to repay your existing mortgage of £72k, and this would leave you with £78k as equity extraction.

The 6 month rule doesn't apply as you have owned the property for more than 6 months - the rule does not apply to the time between mortgage products.

 

One of the criteria for the BTL mortgage will be its rental yeild.  Lenders typically want the rental income to cover a minimum 1.2 times the mortgage payment.

So, if you got a 5% mortgage, your monthly repayment would be £625.  This means you'd need the monthly rental income to be above £750.

 

As long as you can prove to the lender that you are actually going to move out of the property you "shouldn't" have any problems moving to a BTL mortgage product.

 

Hope that helps.

Check out my property journey here:  http://diytopropertyinvestor.co.uk/

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great reply Kylie. I agree that BTL would be the simplest route. Trying to get a bigger mortgage as a main res means you would have to go throught the whole affordability process Jonathan, rather than just being assessed on the rental income of the property. Even if you managed that and then rented it out, you would either have to get the lenders consent to let, or switch it over to a BTL mortgage anyway. Thus making the whole process way more complicated.

 

Points to note...

...some BTL lenders will decline as you are not buying a new main res to live in

...if you cant prove earnings of £25k + pa, you will fail to meet a number of BTL lenders criteria

 

Just go for a BTL mortgage but be careful to pick the right lender

Kevin Wright

Positive Property Finance

Telephone: 01206 586586

Email: inspireme@thinkpositively.co.uk

Brokerage website: www.positivepropertyfinance.co.uk

Workshop website: www.ninjainvestorprogramme.co.uk

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