Can I rent out my home and buy a new one?
Monday, 10 November 2008 02:34
A reader wants to rent out his current home and move up the property ladder.
Tony Davis, myfinances.co.uk mortgage expert from Mortgage Meadow, takes him through the problem and what it means to his finances.
Francesco asks:
Is it possible to rent out your current property and be allowed to buy a new property?
Would the amount allowed to be borrowed change if the first property was sold rather than be rented out?
Tony replies:
Yes is the short answer. Renting your existing property out can be done provided that you have the consent of your existing lender and you comply with the relevant legislation.
I would strongly suggest that once you have your lender's consent you use the services of an ARLA (Association of Residential Letting Agents) letting agent to let and manage your property.
You have the option to look at remortgaging your existing property on to a buy-to -let mortgage and release capital that you could use towards your new purchase (subject to criteria, the terms of your existing mortgage and your circumstances).
However, in the current market this may not be possible or even beneficial for you.
Having lined up the rental of your property you can go and look to buy a new home, this type of mortgage is often referred to as Let-to-Buy.
Criteria for Let-to-Buy varies from lender to lender, some will offer a reduced loan to value because you have a rented property in the background, some will use the rental income to offset the mortgage on the Buy-To-Let property, others will expect you to be able to cover both mortgages on your income alone, depending upon your existing lenders criteria you may be able to move your existing mortgage across to your new home.
You have many, many options and you should meet with an advisor who can run through the costs, the tax implications, the legal issues and guide you to the most suitable solution.
If you have a question for Tony, go to the myfinances.co.uk Ask the Mortgage Expert section. ">
Or for more information or mortgage advice go to Mortgage Meadow.
Mortgage Meadow is an independent mortgage broker and is authorised and regulated by the Financial Services Authority
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