Q I already have a flat and a mortgage and would like to buy a second flat to rent out. I have around £45,000 for a deposit. I would like to know what is the best way to borrow? Should I go for a buy-to-let mortgage or can I borrow against my existing property? GB

A You can borrow against the flat in which you live by extending your current mortgage. The advantage of doing this is that interest rates on residential mortgages are generally lower than buy-to-let mortgages.

But whether doing this will generate enough cash to finance a second flat depends on what your property is worth and how big your mortgage is. Given that you are unlikely to be able to extend your mortgage beyond 90% of the value of your flat, it may be that you won’t be able to raise enough cash, so a buy-to-let mortgage may be your only option.

Most buy-to-let mortgages require a deposit of at least 25% of the value of the property to be let. So with a deposit of £45,000, you should be able to borrow £135,000 meaning you could buy somewhere with a purchase price of £180,000. But bear in mind that the size of mortgage you can get is also limited by expected rental income – you need to show that the rent will cover the monthly mortgage repayments by 125%.

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