Buy-To-Let Mortgage Unobtainable

lianhunt

Hi

I hope this is the right place...

I recently decided to help my daughter out with buying a place as she is unable to gain a mortgage of her own. I wanted to buy a flat with a buy-to-let mortgage and then rent it to her.

I decided to get a secured loan on my property for the deposit (25% and add-ons totalling £20,000) I owed 67k on mortgage, house is worth £165k. I had some problems getting this as I also have an outstanding loan (was originally 25k over 7 years, now owe 15k and 3.5 years left. Payments are £450 p/m) even though I explained that the money was to invest in another property they wouldnt agree it, they said I could apply for 40k and pay off my debts and then have the 20k. Ok i said and then they came back and said no, but they would give me the 20k to pay off my debts (?!?! 20k is what I asked for originally) Anyway I took the 20k intending to use it for the deposit as was my original plan and all that left was to get the buy to let mortgage which I had been told would be no problem as it was all based on rental potential...

They were wrong. We had an offer accepted on the property but when I went to apply for the buy-to-let mortgage I was refused (by Birmingham Midshires and NatWest) as they said I had too much debt. My question is do all other companies take this into account or are there ones that do only look at rental potential. The agent selling the property are also rental agents and have said it could be rented for £500 pcm all day long. We just dont know what to do.

The flat is valued at 71k (our offer that was accepted) i now owe 87k on my house (which takes borrowing up to 140,250 (71k - 25% deposit) and yet my house alone is worth at least £165k (had a valuation done last month) so I cant understand how they can refuse when it seems like win/win to me. My house could cover the two properties should anything happen.

Has anyone got any advice?

herbiesjp

Have you gone via a broker?

This seems very jumbled, when it could have been so very easy.

Your best bet would be to speak to a whole of market adviser, and start right from the beginning i.e the point at which you raised the deposit, and the reason why you did it this way.

Then explain the thought process behind the next steps.

If you fall outside of criteria for the lenders you have approached, you need to find a lender who would be able to help.

lianhunt

Hi, yes, I went via the broker at the estate agents where the flat was advertised, they said they had access to all mortgages.

Do you know of a lender that would help based on this?

Conrad

There are only a few B2L lenders. Those you mention and TMW (not an easy ride by any means and they won't particularly like the tenant being a family member - the EA secretary / staff may reveal this to the lenders suryevor for example).

There are other lenders and options - find a very experienced broker - you'll be able to tell by the things they ask you up front. Shop around. Avoid call centre / online type firms - these have systems that do not work well with anything outside the standard rule book.

dunstonh

, I went via the broker at the estate agents where the flat was advertised, they said they had access to all mortgages.

You should never use an estate agent mortgage broker (independent agents with fully independent brokers excepted). They have a notoriously bad reputation and are too close to the estate agent for comfort.

herbiesjp

lianhunt wrote: »

Hi, yes, I went via the broker at the estate agents where the flat was advertised, they said they had access to all mortgages.

It does not look like they are doing you any favours though.

There are lenders that could help, but your situation is far from clear so I would suggest getting a second opinion from a good whole of market adviser.

lianhunt

hi thanks for all these

I have taken this from the EA website (they are a small independent firm)

"Ferndown Financial Advisers Limited is an established firm of mortgage brokers who are directly authorised by the Financial Services Authority. Their vastly experienced team of property finance consultants arranges mortgages on UK residential, commercial and overseas property.

Their independent market status allows them to source from all lenders, and ensures they find the most cost effective solution for clients."

We havent mentioned that my daughter would be renting for exactly that reason although it is feasible that it could be mentioned unintentionally along the way

I am just really perplexed as to why it was refused like i mentioned there is more than enough money in my house and if I could have taken the whole lot out of my house and bought the flat for 'cash' i would have, i know banks are being a lot more picky i would have thought this was a good investment on their behalf.

herbiesjp

You can't hide the fact your daughter will be living there.

As that affects what lenders are available to you.

You would be in breach of your T&Cs if you did.

Bomo

OP the fact your daughter is living there means that - 'more than 40% of the property is being occupied by an immediate family member' and therefore becomes a regulated mortgage product (not a BTL). This may be how it was presented to the lender and therefore why they took your income into account.

A BTL lender will normally want a basic income from the applicant of say £20,000 but they will not analyse the debts you have in deciding affordability.

There are many products on the market that allow you to help your daughter and you could even take out a residential mortgage together regardless of the fact you have an existing property. As other posters have said your existing broker doesn't seem to be doing you any favours so maybe ask them what other options you have or find an alternative 'whole of market' broker

Thrugelmir

Anyway I took the 20k intending to use it for the deposit as was my original plan and all that left was to get the buy to let mortgage which I had been told would be no problem as it was all based on rental potential...

They were wrong. We had an offer accepted on the property but when I went to apply for the buy-to-let mortgage I was refused (by Birmingham Midshires and NatWest) as they said I had too much debt.

But you didn't pay off your other debt. So your debt level appears now to be £67k + £15k + £20k = £102k.

The fact that you've £20k in cash is irrelevant.

In essence you thought that lenders would be stupid and you could easily bypass their rules. Too obvious I'm afraid. The underwriters can see exactly what your game plan is. There's nothing that hasn't been tried before.

lianhunt

I didnt think lenders were stupid and even having 102k debt and 50k for the BTL mortgage it still takes it well under what my property is actually worth. Because the 20k has been agreed but not paid out yet it is not showing on any credit references so the banks would be unaware of the extra 20k at the moment.

I dont think anybody is stupid i just thought i offered a good investment, one property could easily pay for itself and the other property.