Can You Remortgage the House You Own to Rent Out the Property?

Yes, it is possible to remortgage a property that you own in order to rent it out. This process is often referred to as "let to buy" or "remortgaging to release equity for buy-to-let purposes." You capital raise on your existing property at the same time as moving it onto to a buy-to-let basis. You then use the funds raised as the deposit for your new main residence. 

How Much Could I Borrow? 

Typically most lenders cap the borrowing on your current property at 75% of the value (though there are a few who do go higher), which means that we could raise a mortgage of £108,750, which you would add to the £40,000 to go towards the deposit on the new property. The loan can sometimes be restricted by the level of rental income received, with lenders typically looking for the rent to be a minimum of 125% of the monthly payment at either the pay rate or a notional rate (say 5%). Use our minimum rent calculator to see how much you would need to charge, but in your case there seems to be easily enough rent to cover this. 

At the same time, we would then arrange a main residence mortgage for you for your new home, in the region of £111,250 which with your earnings of £25,000 should be fairly straight forward to achieve. 

Here's how it generally works: 

1. Remortgaging - when you remortgage a property, you essentially take out a new mortgage on the property, either with the same lender or a different one. The new mortgage replaces the existing one, and you may be able to secure more favourable terms, such as a lower interest rate or longer repayment period  
2. Releasing equity - if there is equity in your property (i.e. the value of the property minus any outstanding mortgage balance), you may be able to release some of that equity through the remortgage process. This can provide you with funds to use as a deposit for purchasing another property to rent out  
3. Letting the property - once you've remortgaged the property and released equity, you can then let it out to tenants. This can generate rental income, which can be used to cover the mortgage payments, property maintenance costs, and potentially provide additional income  
4. Buy-to-Let mortgage - if you plan to rent out the property, you'll typically need a buy-to-let mortgage rather than a standard residential mortgage. Buy-to-let mortgages are specifically designed for rental properties and may have different eligibility criteria, interest rates, and terms compared to residential mortgages  
5. Considerations - before proceeding with remortgaging to rent out a property, it's essential to consider factors such as rental demand in the area, potential rental income, landlord responsibilities, tax implications, and the costs associated with property management and maintenance. Additionally, you should ensure that you comply with any regulatory requirements for rental properties in your jurisdiction  
6. Financial assessment - lenders will assess your ability to afford the mortgage repayments based on the expected rental income from the property, as well as your own income and financial situation. They may also consider factors such as your credit history, the property's rental potential and your experience as a landlord  
7. Professional advice - it's a good idea to seek advice from a mortgage broker. At John Charcol we can help you understand your options, compare mortgage products, navigate the application process and ensure that you make informed decisions that align with your financial goals  

Let to Buy Benefits 

One of the real plus points of let to buy is that we can choose from the whole of the mortgage market for both mortgages, rather than relying on one lender to do both. 

Overall, remortgaging a property to rent it out can be a viable strategy for generating rental income and building a property portfolio, but it's essential to carefully consider the financial implications to ensure that it's the right decision for your circumstances. 

If this sounds of interest to you, then please call us on 0330 433 2927and we'll arrange for you to speak in more detail to one of our consultants.