Buy-to-Let Newbie financing question?

Buy-to-Let Newbie financing question?

9:21 AM, 27th July 2022, About 2 years ago 3

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Hi all, I have a question related to starting a small property business.

I own a 50% share of a house in the UK which is worth roughly £200,000. This house is currently being rented out and I receive 50% of the income per calendar month.

I am hoping to purchase another house in the region of £100,000 in the North of England and begin renting that property out; the houses I have been looking at need little to no renovation and so could be put on the market for let more or less immediately.

I have been looking at buy-to-let mortgages (BTL), and although I do not have a ‘cash deposit’ of 20-25% for the BTL mortgage (i.e. the money is not sat in my bank, it is instead in the form of the house asset), I would use the collateral in the form of the 100,000 share I have of my currently owned house. So for example, I could use £30,000 of a possible 100,000 collateral and then get a 70% BTL mortgage from the bank.

But then I was thinking it may be better to use the whole £100,000 collateral I own and buy another house outright worth the same value.

Can anyone shed light on the options I have, please? I am very new to this and trying to find my feet.

Which route is better and safer to take?

Which option would likely result in the lowest monthly repayment?

Thank you all


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Chris Bradley

9:53 AM, 27th July 2022, About 2 years ago

Raising a BTL mortgage on your current asset is likely to need to be in joint names, as I can't see many mortgage companies willing to loan on half an asset.
A mortgage broker to discuss you needs and options is probably the best way to go


10:08 AM, 27th July 2022, About 2 years ago

The first question is who do you own the current house with and what are they willing to let you do as you will need their involvement whether you (a) intend to raise finance on the existing house in order to release some of the £100k for a deposit on the new house; (b) wish to sell your share of the existing house.

For completeness i will mention that the other approach is that, if the other owner wont play ball, you can try and get a Court Order for sale but realistically that isn't something you should consider unless you absolutely have no option. Best, Charles

Laura Delow

8:51 AM, 30th July 2022, About 2 years ago

If you're looking to buy another BTL for £100K with a 70% mortgage (75% is common & if outside London fits most lenders rental affordability if you're a basic rate taxpayer but subject to rental value, you might even be able to get as high as 85% but interest rates will be higher, however you'll only need to find £19K (£15K deposit + £3K SDLT + £1K legals) which you may be able to raise on a personal unsecured loan subject to income status & other commitments & credit history etc, or at 70% LTV you will need a 30% deposit = £30,000 plus SDLT of £3,000 + £1K legal costs estimated = £34K needed which you'll only be able to raise on your 50% share of the current BTL if your co-owner allows you to as they will have to go on the mortgage & be jointly & severely liable for the amount borrowed (but if family they may agree to this).

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