Problem
Graham and his girlfriend/partner Wendy decided they wanted to buy a house jointly in west London to make their new home together. They had found the house they wanted and were keen to move quite quickly so as not to lose the property. Wendy had sold her flat quite quickly and was ready to move.

However, Graham was having trouble selling his property as it was a large house in a fairly exclusive area of west London. He did not want to sell at a reduced price and was not sure what to do. He contacted Forum Wealth Management to discuss his options.

Graham had a mortgage of £120,000 outstanding on his property, which was valued at £475,000.

Solution
We looked at the situation and decided that one option for him was to let out his property, freeing him a deposit to put down on the new hose with Wendy. The rental income he is going to achieve on his current property is £1,500 as it is in a nice area and only half a mile from a tube station.

We arranged to re-mortgage his property – taking it from a residential mortgage to a Buy To Let mortgage for £170,000. This allowed him to pay off the residential mortgage completely and raise the £50,000 needed for his share of the deposit and purchase costs. The new mortgage rate was very slightly higher (by 0.20%) However, the rental income was nearly £650 a month more than the new Buy To Let mortgage cost.

This meant that the mortgage lender for the new house purchase would not only take into account ALL of Graham’s earnings and Wendy’s earnings when calculating their new mortgage amount: They would also take into consideration most of Graham’s excess rental income profit.

Also, the Buy to Let lender was offering a free valuation and £200 assistance with legal costs.
This means Graham has the deposit for the new house, can fully afford the new mortgage and is making a very sizable profit on the rental of his original house.

We are also advising Graham on how to manage his affairs to ensure he does not incur any capital gains tax on the property now let out. Plus we arranged Landlords Insurance policy to protect the property.

David Smith