Rent out First Home, buy Second Property

Hi There
Just wondering what peoples opinions are on renting out primary residence, and releasing equity to buy a second home.

Current tenant who rents a room in house, is willing to take over rent for entire house so no problems there.

Approx 80K equity built up in PDH.

Can I get an equity release? Do I need to change my existing mortage to a buy to let? Will it be as easy to get a 2nd mortgage as it was a first? Ie. using an income multiple or will they see having an existing mortgage as a drain on my income even though rent is covering it?

Thanks in advance guys, this is all new to me!

eirrek2005 said:

Hi There
Just wondering what peoples opinions are on renting out primary residence, and releasing equity to buy a second home.

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Have you read this thread?

Sell home or keep as an investment?

Remember that any interest on any equity released on the former PPR and now rental property to buy a new PPR cannot be offset against rental income. Only interest on the mortgage amount outstanding at the time that the former PPR becomes a rental property can be offset against rental income.

Can I get an equity release? Do I need to change my existing mortage to a buy to let? Will it be as easy to get a 2nd mortgage as it was a first? Ie. using an income multiple or will they see having an existing mortgage as a drain on my income even though rent is covering it?

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You will definitely need to talk to the lender (or another lender if you are switching at the same time) or broker about this.

When did you but the first house? Is stamp duty clawback a poential issue?

Whether or not to go ahead is entirely subjective so no point giving my opinion on that.
In relation to the mortgage.

You say there is 80k equity on a market value of?
You will need to change your existing mortgage to a buy to let and interest only if you so wish.
Not being smart but how easy was it to get your first mortgage? What's your income, what size mortgage will you require?
Some lenders are happy enough once the rent covers the mortgage repayments, some will need the rent to cover the mortgage on a multiple of 1.5 times.

Thanks for the replies Guys
Bought the house in April 05, so not 100% sure about the stamp duty....

Thanks again Guys,
Income is 52K with avg annual bonus of 10K, am 24 years old but bought my 3bed mid tce down the country for 150K. AMV is now 260K. Second property is on market for 285K.

Definitely doable financially.
Check if you will have a stamp duty clawback, did you pay stamp first time around?

eirrek2005 said:

Thanks for the replies Guys
Bought the house in April 05, so not 100% sure about the stamp duty....

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As you will change your PPR to a rental property within 5 years of buying it, full stamp duty will be payable on your first house. This in itself may be the guts of a years rent.