Owning your own home

How does BTL work?
Could I remortgage my flat with a BTL of more than the outstanding mortgage, then use the extra as a deposit for a second mortgage to buy a house for me to live in?

As it stands it looks like I could rent my place out for twice my monthly mortgage repayments, so if there is a way of capitalising on that, rather than selling up, that might be a good idea.

Hard one to answer as it's all down to numbers.

First off, BTL mortgages are usually at a higher rate than a regular mortgage so straight away your monthly mortgage payment will increase. Having said that some lenders will allow you to let you mortgaged property without switching the loan to a BTL product.

In broad terms you can mortgage up to around 80% of the value of your flat provided the likely rental income covers 125% of your mortgage payments. This means if your payments come to £8,000 a year you need to be pulling in a rent of £10,000.

Without knowing your particular circumstances, let's say you have a flat worth £200,000 and you currently have an outstanding mortgage of £100,000. You could remortgage it at 75% of it's worth, borrowing £150,000 which gives you £50,000 to play with as deposit for somewhere else. You could choose to stay put and use the cash to buy a BTL property or move on and rent yours out.

You also need to decide if it's actually worth renting your place out. A good starting point is the rental yield which wants to be better than 5%. This is calculated by annual rent / property value x 100. You also need to look at likely maintenance costs of the property which is likely to get a harder than usual life with tenants. Also factor in other expenses. Agent's fees, void periods, insurance, ground rent, service charges, etc.