Deciding to keep your existing residential property and rent it out requires some planning when looking at whether it is possible for a few reasons. First, while the capital growth in London has increased exponentially rental income has not followed suit; this is important as the rental income determines the maximum loan a lender will be willing to provide (this varies depending on the lender) as such it needs to be established whether you can release enough equity from your existing property to purchase the property you want or whether a compromise has to take place. Secondly, unlike BTLs, which are based solely on the rental income of the property, the majority of lenders will also look at your personal income to ensure that both your debt to income is not excessive and that you are not looking to borrow more than the lender would allow on a residential basis. Finally, the BTL lender will want to know about the onward purchase, ensuring you can afford the monthly payments and that you are purchasing a residential property (often requesting the mortgage offer as evidence). Onward purchase
The lender who will be considering the onward purchase will be just as inquisitive when looking at a Let to buy scenario, some lenders will take it as a full commitment therefore reducing the amount you can borrow; others will want to ensure that the property is self-financing before they would be willing to discount it. Similarly a lender may require a mortgage offer for the BTL. With all this in mind the decision to retain your existing residence can be a wise decision, and one, which means you, may be in a position to purchase the property you want without the issue of selling your property. To consider this process, the earlier you speak to an adviser the better, ensuring that you can achieve the required equity on both the BTL and residential to proceed with a smooth transaction.