How can I work out how much we can borrow?

lowis

Total value of existing two properties is £430,000 of which 185k is equity.

Our total outgoing mortgage payments per month are £1100.

If we rented out our current homes out joint monthly rental income (before any expenses etc) would be about £2100.

Combined incomes are about £60k per annum.

How would a mortgage lender use the figures to determine what to lend for a third property?

Thanks

lowis

...or do lenders only look at earned income through 'work'? anyone?

Scott

Income from rented properties can be taken into consideration. They may wish to see copies of signed leases from tenants and proposals for how you will fill any gap in funds should you not have a tenant for a period of time.

lowis

thanks scott
can any brokers give me an idea at what sort of lend we would qualify for if rental income was considered?
I have absolutely no idea how to work this out (regular mortgages I'm fine with)
thanks

homer_j_3

Look at every property individually. List what each is worth and the debt outstanding is on each. You then need to work out what % of the debt is against the value of the property - i.e. work out the loan to value of each product.

If each of these figures is 85% or lower then that is great.

You then need to work out what each rental income is compared to each mortgage payment. If the rental income exceeds the mortgage payment then by at least 15% then you are in a good position.

If you can get a positive result from what I have said above then you can use your full income to borrow against the 3rd property by putting the other 2 on Buy To Let products.

You may need to raise some capital out of your properties for a deposit on your third so consider what the figures would be after raising deposit.

You can find mortgage payment calcs and I would work on 5.5% as a guide for your BTL product interest rates. Whilst they may be slightly lower or higher - its a good starting point.

I would also add that you may be better to let a broker do this for you as 1 remortgage can be a hassle, nevermind 2 and a purchase.

lowis

thanks for the info homer_j

yes, i would definitely use a broker if i ever did this.

i was just wondering what factors were taken into consideration - if it was just income or income PLUS any surplus rental income from what would become the two BTLs