can I/we buy a 2nd place?

longwalks1

Ok Here goes, Here are my details:

Salary: £40k
Mortgage: £100k
Property Value: £160k

I currently rent out 1 of the 2 bedrooms in my maisonette (I’m 7 years into a 25 year mortgage), for a total of £450 a month. I want to buy another place to live with my girlfriend, who earns £17k and between us we have £40k for deposit (cashing in some of my shares). What options do I have as theoretically I may have 1 and a ½ mortgages? (is this even possible or allowed?)
Currently got 3 years left on a 5 year fixed with First Direct at 4.99%, is there any way me and my girlfriend can get a join mortgage? If so what are we looking at being able to borrow, and what deposit would we need to put up?

If I’ve missed anything out please do ask, as working nights this week so not quite with it!

Thanks in advance for any help/advice

herbiesjp

You need to get consent to let from First Direct, or if they decline, need to change it to a BTL.

For this property to be "ignored" by the lender for the new property, the rental income will need to be around 120%-130% of the mortgage payment.

You will then be treated like a new mortgage application, for the new property.

It can be more complex than explained - but that is in essence how it works.

longwalks1

Thanks herbiesjp

So my first move would be to phone First Direct and ask them outright, or maybe try and secure some sort of agreement with tennants to show FDirect I have people for it, what do you thinks best way to approach this, and also, my chances of them saying 'yes'?

My mortgage is £711 pcm and I could get £800 renting it out pcm.

Then, i'm guessing we (partner and I) could borrow the remaining of my wage, plus her wage x multiple currently used, is this right?

Or the fact I was covering my existing mortgage with the rent from my current house, could we theoretically borrow my whole wage, plus girlf's wage x the multiple?

Many thanks again

herbiesjp

Yes - first port of call is First Direct.

Be totally upfront about your situation, and explain why you are looking to do the above.

Then you will have to see what they will say.

Having tenants ready to move in is not essential, but can help.

The lender for the new property will want the mortgage covered by the rental income - different lenders have different amounts of rental coverage.

If the you meet the criteria - then the lender will use the full amount of your incomes and then apply multiples.

If there is a shortfall to their criteria, then the lender may make a deduction from your income before applying the multiples.

longwalks1

Cheers herbie, will get my figures together and give them a call and lay my cards on the table.

You say lender for the new property will want mortgage covered by rental income, I'm assuming you mean if I get new mtg with Halifax, they'll want to know that my existing First Direct mortgage is covered by renting my existing property out?

Looking at properties between £130 and £150k, so our combined income of £57k per annum should be enough I'm guessing (if the lender 'ignores' my first place), are there any lenders that are more understanding of having another property that I'm letting out, but not with a BTL mortgage?

Thanks again herbiesjp

kellykins

i am in the same position as you. I have a house... my mortage is currently £404 a month, I am getting a rental income of £400 a month, i have been accepted for another (90%) mortage with my patner from Halifax, Halifax just wanted to know that I was getting income from the rent they wanted to see by bank statements and a leese agreement. (it didnt even matter too much that the rent didnt cover my whole mortgage)

I was very surprised at how easy the process was to be honest, infact we were offered a mortgage for £232000!! we only wanted 117000 (you can see how people get into debt! no way could we afford this!)

We too earn the same amount as you (around £60000) a year. I think your best bet is to go to a mortgage brocker...

kel x

herbiesjp

britishboy wrote: »

Cheers herbie, will get my figures together and give them a call and lay my cards on the table.

You say lender for the new property will want mortgage covered by rental income, I'm assuming you mean if I get new mtg with Halifax, they'll want to know that my existing First Direct mortgage is covered by renting my existing property out?

Looking at properties between £130 and £150k, so our combined income of £57k per annum should be enough I'm guessing (if the lender 'ignores' my first place), are there any lenders that are more understanding of having another property that I'm letting out, but not with a BTL mortgage?

Thanks again herbiesjp

You should be ok on the Let To Buy front - however the credit problems of your partner may be the stumbling block.

longwalks1

Thanks again people

Great news Kel, glad you got your offer through and hope it goes smoothly for you both, you've given me a big ray of hope! :j

Herbie
Spoke to other half and she said her credit file wont look good, so am now wondering if a lender will 'ignore' the First Direct mortgage through the Let to Buy route (if First Direct agree to this), could someone (maybe First Direct again, or Halifax like kellykins mentioned) give me a mortgage on my own, bearing in mind I have 40k deposit if need be, and by myself earn 40k per annum?

Thanks for your help

Thrugelmir

britishboy wrote: »

My mortgage is £711 pcm and I could get £800 renting it out pcm.

Not quite as simple.

Net rental income is taxable. Only the interest element of the mortgage is offsetable against rental income, not the capital repayment element.

Other costs can be offset against rental income before tax is deducted.

Taking a commercial view. A realistic gross rental income should be at least 10% of the property value. This is only a guide. But going far below this level raises the risk of the venture going terribly wrong considerably.

Its worth sitting down and crunching numbers. Also there may be changes in the post election budget which affect residential property as an investment. Such as increased capital gains tax rates for example.

herbiesjp

britishboy wrote: »

Thanks again people

Great news Kel, glad you got your offer through and hope it goes smoothly for you both, you've given me a big ray of hope! :j

Herbie
Spoke to other half and she said her credit file wont look good, so am now wondering if a lender will 'ignore' the First Direct mortgage through the Let to Buy route (if First Direct agree to this), could someone (maybe First Direct again, or Halifax like kellykins mentioned) give me a mortgage on my own, bearing in mind I have 40k deposit if need be, and by myself earn 40k per annum?

Thanks for your help

First you need to test the water with FD regarding the consent to let.

Once you know that answer you can then move on, taking the appropriate route.

Based on the figures, it is possible to get a mortgage, for the new property.

However, as Kellykins rightly says, you are better off getting help from an adviser, as they will be able to make sure you fit the criteria for the whole scenario.

MORPH3US

Indeed, speak to FD and let us know what they say britishboy...