Buying 2nd house and renting out 1st house, allowed to state rent as income?

ahfh1

Hi,

I am looking to rent out my current house that I have lived in now for 3 years and buy another property for pastures new.

I earn £25k from my employer as guaranteed income, and am expecting to get £10k p.a. if I rent out my current property. When applying for a mortgage, am I allowed to add the income from property as my main income, therefore allowing me to borrow more even though it is not guaranteed e.g. there could be long unexpected vacant periods? If so it would make a big difference, meaning I could borrow on a multiple of a £35k salary instead of a smaller £25k salary.

Also, how do I prove to the lender that I can get £10k for rent, as I'm not physically able to prove it to them until I actually move out and buy the 2nd home and start renting out the 1st house!

Cheers

clutton_2

do you have a mortgage on your current home ?

cattie

If you haven't even moved out & rented your property, how do you expect any lender to even consider that a figure of £10k is an achievable rent?

There is a glut of rental properties on the market & because of this rents are being reduced in a lot of cases to attract tenants.

As clutton asks, you haven't mentioned if there is a mortgage outstanding on your current property. If so you would need to get consent to let from lender & not all lenders grant this, or change mortgage to buy to let & for this a large deposit is normally required.

ahfh1

Yes, there is a mortgage on the current home, but income from rent will easily cover the mortgage payments.

The 'achievable' rent is deduced from how much my neighbours are currently advertising their property for, adjusted for income tax and 2 months of vacant periods.

I have checked with my lenders and, yes, consent to let is fine. Just need to sign a form.

Jowo_2

I think you are focussed on an optimistic scenario with income from letting but you also need to consider a pessimistic scenario, one where the are huge repair bills associated with the rental property, and/or where the tenants refuse to pay the rent or you can't find tenants, and/or where you also have high expenses associated with evicting non-paying tenants who are currently trashing every part of the property.

It's a risk that is unlikely to happen but has a high impact if it does so you should still consider this. I have come across threads where the impact of poor tenants is so high, the landlord has ended up having the property repossessed.

Catblue

If you've had your house for 3 years now, you may not have much equity in it, unless you put down a very big deposit on it.

From what you've said, you are hoping to break even on your first home by renting it out, so I'm not sure where this £10K "income" comes from.

If you truly have an income of £10K from the rent then you also have an outgoing of £10K (which hopefully will pay your mortgage, repairs, gas safety, insurance etc.). You don't think the second mortgage company will realise that the first mortgage has to be paid every month?

And of course, interest rates will not stay this low forever.

It seems somewhat unfeasible to me that a £25K salary can cover two mortgages that will have been taken out in the last three years.

ahfh1

Good points guys, it does look like I need to take a more pessimistic view and think worse case scenarios.

Cissi

ahfh1 wrote: »

Hi,

I am looking to rent out my current house that I have lived in now for 3 years and buy another property for Pastures New.

I'm sure she'll be delighted to hear that