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What happens to my 100k equity when I relocate?

I own a flat bought for £340k; interest-only £240k mortgage with £100k equity. I want to buy a new flat worth about the same in a different area, however I am not looking to sell my current flat. I want to keep it, get a buy to let mortgage and let it out. What happens to my 100k equity when I relocate? Does it move with me or stay in the flat I'm looking to let? What if the flat has increased in value, but as I am not selling, how can I realise my increased equity? If the flat is deemed by my buy2let mortgage provider to have gone up in value from 340k ( when I bought it) to 400k and I borrow 240k as a buy2let mortgage, will I have to come up with 160k as a deposit? Doesn't that mean I have lost 60k in equity when I eventually sell the property (assuming I sell for 400k)?

Asked on Mar 11 2014, Selling in London | Report content

Answers (2)

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  • You have a 240,000 mortgage secured on a property that is worth more than that. If you remortgage the flat the amount you can borrow will depend on your ability to make the repayments and also the loan to value ratio the lender will advance. If it is a buy-to-let mortgage the repayments will be considered in relation to your likely rental income and the amount of the loan is unlikely to be more than 80% of the value. If the value has increased and the lender is willing to lend more than your current mortgage then you will have some spare cash after the remortgage.

    Answered on Mar 12 2014, Report content
  • If you just remortgage for £240k, regardless of whether the flat has gone up in value you dont need to find additional equity or deposit and when you come to sell the equity you get back is the sale price less the outstanding mortage, so using your numbers you'll get back your equity of £160k. If you want to release some of the equity now and remortage the flat for say £300k then the new mortage lender repays the existing £240k and releases £60k to you which you can use towards the new property. Of course you now have a morgage of a £300k on a flat worth £400k with equity left in the flat of £100k however as you've just taken out £60k you've not lost any equity.

    Answered on Mar 12 2014, Report content

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