is this possible ?

ruthers_2

Hi there, my situation is this: I own outright (mortgaged paid off) a property of value around £270,000 in London which i am letting and receiving around £850 per month income.
I now wish to buy a property in Edinburgh, as my principle dwelling, for around £250,000 but ideally would like to keep my property in London as well.
My income from my employment is £35,000 but i have zero savings.
Is it realistic to take out a 'buy to let' mortgage against my London home with an additional normal mortgage to achieve the asking price on the Edinburgh property?
Any help or ideas would be greatly appreciated,
R

MortgageMamma

Yes its quite possible you could switch your london mortgage to a buy to let mortgage and then buy the edinburgh property, but the edinburgh mortgage would be more than seven times your income. Unless you have a partner that is going on the mortgage with you, you will find that hard to do, unless you self certify using the excess rental income you receive above your buy to let mortgage amount, and pay a 10-15% deposit on your new property. If you are employed you might find this difficult as self certification mortgages for employed individuals can be deemed a bit suspect.

Ian_W

MortgageMamma - I think you're missing something here - or I am!!
The OP's London home is unencumbered - no mortgage, zero, zilch, nada!

Surely s/he can borrow say £125K [<50%LTV] with IO repayments at 5.5% at circa £572pm - rent received well in excess of 120% of this, w/o this affecting their ability to take out a residential mortgage on the property they want in Edinburgh? A £125K residential mortgage for the jockland prop would be 3.57x salary, which I would have thought do-able.

Am I missing something?

ruthers_2

thankyou for both replies, and Ian W you correctly point out that I do not have any loan outstanding on the London abode. It therefore sounds feasable and if i were to get a repayment mortgage for the other £125,000 I'm guessing my total repayment would be in the region of £1,500 per month (£572 + £776 + endowment for the 'buy to let') and with £850 coming in from rental i would need to find £700 extra per month?

I'm sure it isn't too complicated but my head still hurts!
Thanks for easing the pain guys....

Ian_W

ruthers,
You don't need an endowment [they don't really do them any more!] for the BTL mortgage, the repayment vehicle is the property itself when you sell it.
There is a potential tax benefit with mortgaging the letting property in that you may well be able to offset interest against income before you declare your profits for tax. I always thought the loan had to be for a business purpose but, according to a couple of accountants who post on here, providing the loan doesn't exceed the value of the property when you started letting it is claimable as it is "business refinancing".
So provided you don't go above the value when you started letting it may be as well to borrow as much as poss against the let property IO. BTL mortgages are generally up to 85% [some more] LTV and require the rental acheivable to be 120-130% of the repayment.
Do check that out with your own accountant but worth doing if it is correct.

AndrewSmith

Ian_W wrote:

ruthers,
You don't need an endowment [they don't really do them any more!] for the BTL mortgage, the repayment vehicle is the property itself when you sell it.
There is a potential tax benefit with mortgaging the letting property in that you may well be able to offset interest against income before you declare your profits for tax. I always thought the loan had to be for a business purpose but, according to a couple of accountants who post on here, providing the loan doesn't exceed the value of the property when you started letting it is claimable as it is "business refinancing".
So provided you don't go above the value when you started letting it may be as well to borrow as much as poss against the let property IO. BTL mortgages are generally up to 85% [some more] LTV and require the rental acheivable to be 120-130% of the repayment.
Do check that out with your own accountant but worth doing if it is correct.

Spot on IanW, you are allowed to re-finance a buy to let up to the original purchase price as this is, put simply, reclaiming capital that you put in to begin with. I also agree that the mortgage on the buy to let should be as much as is possible to allow for ofsetting the payments against tax and keeping your residential repayment mortgage lower on the Scottish property, thus staying well within the lender criteria for mainstream mortgage products.

It is therefore perfectly feasable to take a 'full status' buy to let mortgage on the London property, and a standard mainstream mortgage on the Scotland property.

Shouldn't be too difficult, depending on your situation and circumstances of course.

Andy