Planning ahead for the next property - do we sell the BTL?
Discussion
My wife and I are planning ahead for our next house. We don't have a specific timeline, but we'd like to aim to buy somewhere quieter, with a bigger garden, off-street parking... all pretty normal stuff!
She has a two up two down house of her own back in Swindon, now on the market. She accepted an offer but the sale fell through, so it's back on the market. It has 20k of equity in it which can go towards the next purchase, and it has made great money as a BTL so would be a good medium term investment, but when we find the right house, we want to move quickly and will apply for a joint mortgage on our joint income.
Our logic is, to secure a bigger mortgage for a bigger house, we should reduce our current exposure. Otherwise, we may as well subtract the value of her mortgage on the BTL from what the banks are willing to lend us.
Does this all sound sensible or is it wrong for her to sell her BTL?
We think lenders will see the BTL as an existing loan not a steady income, so we won't be able to borrow as much.
She has a two up two down house of her own back in Swindon, now on the market. She accepted an offer but the sale fell through, so it's back on the market. It has 20k of equity in it which can go towards the next purchase, and it has made great money as a BTL so would be a good medium term investment, but when we find the right house, we want to move quickly and will apply for a joint mortgage on our joint income.
Our logic is, to secure a bigger mortgage for a bigger house, we should reduce our current exposure. Otherwise, we may as well subtract the value of her mortgage on the BTL from what the banks are willing to lend us.
Does this all sound sensible or is it wrong for her to sell her BTL?
We think lenders will see the BTL as an existing loan not a steady income, so we won't be able to borrow as much.
Assuming the BTL rental income is 125% of the monthly interest payment it should be considered self-funding by your residential lender. (also assuming it is a BTL or has formal Permission to Let from the current lender).
If it yields well and you can buy the place you want without needing £20k it could make sense to keep it for the long run and an eventual source of retirement income. Quite a lot of hassle and expense to go through to raise £20k....
If it yields well and you can buy the place you want without needing £20k it could make sense to keep it for the long run and an eventual source of retirement income. Quite a lot of hassle and expense to go through to raise £20k....
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