Would anyone give us a mortgage?

pfarre10

Hi there,
I just want to ask a question about mortgages. I've never used this website before so i hope that my question will be appropriate and not too stupid.
Me and my husband are living in a flat and want to move 400 miles away back to be near my family. We want to get a mortgage to buy a house so that we can start our family.
This is our situation:

1. We live in a flat that was inherited and currently don't have any debt or a mortgage on it.
2. The flat is worth around £80,000-£100,00
3. Ideally we would like to keep it and rent it and have worked out that we should get around £350 per month from rental income.
4. My husband has had to go self employed and he is an electrician getting steady work with one specific company and this will keep going indefinately. He earns around £1,800 per month.
5. Currently i'm not working but usually i do temporary work in offices.
6. I've checked my credit score and it's ok, neither of us have any loans or debts.

I don't really want to go to a mortgage advisor yet until i can find out if anyone would think about giving us a mortgage. I also really need advice of about how much money we could get a mortgage for. Basically, we know nothing and we'd be extremely greatful for any help or advice.

Thanks

silvercar

Do you have any savings? You will need a deposit and the costs of the move eg solicitors, stamp duty etc

You could get a BTL mortgage (BTL=buy to let) on the flat; that would give you some deposit on the house. It would then mean you have a mortgage on the flat and one on the house, so budget carefully, especially as you will be funding the upkeep on two places.

Don't be afraid of asking on the mortgage board, there should be experts on there who should know if someone will give you a mortgage. I would suspect that they would require at least one of you to be in steady work and have accounts if self employed to show 2 or 3 years of solid income.

pfarre10

Thanks for your reply. We have around £10,000 in savings but my husband has only been employed for 3 months. He was with the same company 2 years ago as an empoyee but we got married in Vegas and went travelling for 6 months so that mucked things up.

Annisele

Unless you take out a mortgage on the flat, you'd be restricted to a mortgage of a bit less than £90k on the new house, regardless of earnings. That's because the lender would require the deposit to be 10% of the purchase price, and taking into account the other costs you'll incur your £10k restricts you to a loan of a bit less than £90k.

The higher your deposit the better rates you'll get - so you should give serious consideration to selling the flat. I'm not saying that you necessarily should sell, only that you should cost both options. Also, £350 a month rental income doesn't give a fantastic yield. If you assume a valuation of £100k and a couple of void periods a year, yield would only be 3.5% - and it would be reduced further by agents fees/maintenance/other costs.

How much are you looking at spending on your new property? Is it an option to rent in the new area?

The 'only employed for 3 months' bit is going to make life a great deal more difficult than it would otherwise be - especially coming after six months of travelling (and hence no income). Presumably your husband will have to leave that job if you're moving 400 miles away - so what are your plans for repaying the mortgage?

I suspect that you won't be able to get a mortgage at all for a property 400 miles away from where you live, given your employment history - but I'm not a mortgage broker, and a broker is likely to post shortly.

Fire_Fox

Is that £350 a month net or gross? Have you factored in income tax, service charges, ground rent, buildings insurance, landlord's insurance, letting agents fees, vacancies, tenants who do not pay or trash the flat? Do you need/ can you get consent to let the flat from the freeholder (read the long lease)? Why not get a secure job yourself before thinking about this?

pfarre10

The flat can be let out as there are 2 flats in the block and the other one has always been rented since we lived here. They pay £400 for a 1 bedroom. We should get at least £450 as ours is a 2 bedroom flat and i thought if i took off a £100 per month that would be realistic but realistically i might be wrong.
At the moment we're trying to save every penny to get more of a deposit but what do you think is the main factor which would stop us from getting a mortgage? does anyone know if being self employed makes it harder to ger a mortgage?
Thanks again everyone for your help.

Leew1231

Being self-employed is a big factor. I have a friend who is earning a good amount self employed but lenders won't touch him until he has been going for 2 years, unless he can get a 25% deposit together.

My wife is a supply teacher at the moment. Despite earning substantialy more doing supply, she has gone back to being contracted to help us buy our house that is currently going through for September to satisfy the mortgage lenders. That said everyone's situation is different and you really should speak to a lender or broker. Find a new fee broker who will tell you his/her opinion over the phone on the information you have posted.

ItMightBeUsefulOneDay

pfarre10 wrote: »

what do you think is the main factor which would stop us from getting a mortgage? does anyone know if being self employed makes it harder to ger a mortgage?.

Being self employed makes it very, very difficult to get a mortgage in this current climate unless you have 2 years or more of books. The banks will also be a bit picky over which figures (from the accounts) they will accept as your earnings or salary.
If you're currently living mortgage free, save like mad. Get as much cash as possible while you build up the books from your husband's self-employment. You may be able to get a BTL mortgage on the flat (75% of the value) and free up some cash but it's highly unlikely any bank will lend to you for the residential mortgage.

If I were you, I'd stay put and get as much saved as possible. When the time is right you'll not only have the rental from the flat as income but also a nice hefty deposit.

Fire_Fox

pfarre10 wrote: »

The flat can be let out as there are 2 flats in the block and the other one has always been rented since we lived here. They pay £400 for a 1 bedroom. We should get at least £450 as ours is a 2 bedroom flat and i thought if i took off a £100 per month that would be realistic but realistically i might be wrong.

Please do not make this assumption, read your long lease as advised. Just because the other property *may* be breaching a covenant does NOT mean you have carte blanche. The other leaseholder *may* have applied for and been granted consent.

The maths is a lot more complex than simply what the rental income is, you need to factor in service charges, ground rent, buildings insurance, landlords insurance, internal repairs and renewals, major works, letting agents fees, income tax, capital gains tax, vacancies, tenants who do not pay or trash the place ..... :eek:

I've just re-read the OP and noted you want to relocate 400 miles away, so neither of you will have a job? How do you propose to fund a mortgage?

bdl1brick

Sell the flat and use the cash for a deposit on a new place! If you are going to be 400 miles away you will need to get the flat managed so you will be left with a small amount of rent plus lots of hassle if you are not local.

pfarre10

I really don't think renting the flat our would be an issue as when we bought the flat it had been rented out for 15 years previously. But, after reading a lot of replies it looks like the best thing to do would be to seel the flat. My husband was going to continue working for the same company for the mortgage until he could find a job in the new location, plus my family could help finance us for a few months. Does anyone know if we would be able to get a mortage if we sold the flat and had around £100 deposit. With the same situation as i've written above what amount would a bank give us?