Buy-To-Let Mortgage Unobtainable

Thrugelmir

lianhunt wrote: »

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.

Leveraging up is speculation not investment in the current property market. An easy way to lose £'000's.

jamesd

lianhunt, you probably took the wrong approach here, because a BTL mortgage is the wrong one to be after in your general situation.

Debt first. The monthly repayments affect affordability for the mortgage. At £450 a month that's significant. You could improve affordability calculations by increasing your own mortgage instead of taking out a secured loan. The longer repayment term then decreases the monthly cost of the debt in affordability calculations. So say you start out by remortgaging to 75% loan to value on your own home. Use that money to pay off the other borrowing so you're debt-free except for the mortgage and wait a couple of months for this to show up in credit reports. Except you can't wait long at the moment. But you can still start off this process.

Once that is done you then have a place you're buying for a family member. NatWest and some other lenders will do loans for close relatives as normal residential mortgages, no need for a BTL mortgage. Use the cash left over after remortgaging your own place and add a mortgage of £10,000 to £30,000, whatever is needed, for the new place.

For BTL the first choice of borrowing is increasing the loan on your own home, because standard residential mortgages are cheaper than BTL mortgages, so you make more money. You still get to deduce the interest cost up to the purchase price of the BTL from your rental income for tax purposes.

A broker who isn't part of an estate agent is a good starting point now, to see whether they can find a neater way out of the current situation. If you're still within any cancellation period of the secured loan, act quickly so you retain the option to cancel.

lianhunt

Hi thanks for this, remortgaging was something that I looked into rather than a secured loan however the rate I have on my mortgage at the moment is so good (1% above Base Rate) they said should i remortgage they would not be able to offer me this again as they no longer do it (HSBC) and 20k was the most they would give me as a secured loan (both the loan and mortgage have 14 years left to run) Another option we thought about was purchasing the property in both our names as a residential property but she has bad credit (there is another post on here about a joint loan and non paying ex-boyfriend) but will my good credit and 25% deposit 'cancel out' her bad credit or could she apply for a mortgage (again with the bad credit) and have me as a guarantor?

Conrad

No you cannot be guarantor in this case as guarantor mortgages are only available where all applicants are squeaky clean. It's a bit like the scenario where a shoplifter wants to look after your shop and says it will be safe as they will have thier non shop lifting partner with them - if you see what I mean.

You could buy a second residential property on your own - thats the sort of thing a good broker will have looked at with you. All the best.

jamesd

Whether the remortgage for you is best depends on all of:

1. The rate you'd get on a remortgage.
2. The current rate, 1% over base.
3. The rate you'd get on a BTL mortgage.

You'd need to have the broker work out the lowest overall cost and it still might pay to remortgage to get this done.

You might also consider that you aren't fixed at 14 years and extending the term helps with affordability. You can overpay later to get it back to 14 years once you're over the affordability issue.

Conrad has the right idea here, a broker and calculations for the available options so you know why a particular one is the way to go. And how much or little more it'll cost you to do whatever it takes to get the deal done.

ericonabike

Not quite sure why you didn't remortgage your own property for the sum that you needed to buy the flat? Seems you have enough equity. We've recently done just that to buy a house for our son to live in, and despite the doom-mongers here, it's all worked out fine.

lianhunt

ericonabike wrote: »

Not quite sure why you didn't remortgage your own property for the sum that you needed to buy the flat? Seems you have enough equity. We've recently done just that to buy a house for our son to live in, and despite the doom-mongers here, it's all worked out fine.

I would have done this except my mortgage rate at the moment is so good 1% over Base Rate and they told me they would not be able to match this with a re-mortgage. Not sure i could re-mortgage for the whole amount either? I earn 32k and its a single salary mortgage. We figured BTL as we were told your own earnings and outgoings were irrelevant it was all based on rental potential.

Thanks everyone for all the comments its really helped, will go off and find another (wholly independent) broker and see what they can do

herbiesjp

You do not re-mortgage with the same lender.

You ask the same lender for extra borrowing - only the top up amount will be on a different rate.

So you still keep the good existing deal on the current mortgage.