Mortgage advice

thedon31

I currently have a mortgage of 54k over 24 years on a property worth 120-130k. This is on a 5.7% fixed rate until January 2012 and I pay £350 a month.

Me and my girlfiend have found a new build home that we want that would set us up for life. The property is 250k.

Combined with money saved of 20k and the profit made if i sold my current property this could give us a deposit in the region of 95k leaving us with a mortgage of 150k left on the new property.

However, I dont want to sell my current place as it has a lot of sentimental value for me. I was thinking of re-mortgaging and taking out another 10k on this house to put with our savings and then renting the house out for which I could probably get £600 per month.

If I was to do it this way, we would then have 30k deposit but we have a combined income of 43k and i dont have the best credit rating. so, deposit and mortgage we could get would only total 200k.

What would the bank do in this situation? Would be able to keep my current house by doing it this way as there would be 65-75k equity in my current house?

I know this is confusing but i'm trying to find any way possible of keeping my current house.

Thanks in advance for any help.

GMS

thedon31 wrote: »

I currently have a mortgage of 54k over 24 years on a property worth 120-130k. This is on a 5.7% fixed rate until January 2012 and I pay £350 a month.

Me and my girlfiend have found a new build home that we want that would set us up for life. The property is 250k.

Combined with money saved of 20k and the profit made if i sold my current property this could give us a deposit in the region of 95k leaving us with a mortgage of 150k left on the new property.

However, I dont want to sell my current place as it has a lot of sentimental value for me. I was thinking of re-mortgaging and taking out another 10k on this house to put with our savings and then renting the house out for which I could probably get £600 per month.

If I was to do it this way, we would then have 30k deposit but we have a combined income of 43k and i dont have the best credit rating. so, deposit and mortgage we could get would only total 200k.

What would the bank do in this situation? Would be able to keep my current house by doing it this way as there would be 65-75k equity in my current house?

I know this is confusing but i'm trying to find any way possible of keeping my current house.

Thanks in advance for any help.

You are looking for a 'Let to Buy' mortgage.

Really you need to speak to a 'Whole of Market' broker to see the best way forward.

If (in your own words) you do not have the best credit rating are you sure you can raise 200k on 43k income. This is almost 5x income, a level which would usually require an excellent credit rating.

What is the problem with your credit? CCJ's? Defaults? Missed payments?

Speak to your current lender with the scenario and see if they would grant permission to let.

Not the most straightforward of cases this, and if your current lender will not allow you to let the property you would need to remortgage to a Buy to Let deal which may prove tricky if your credit rating is poor.

[Deleted User]

May not be the answer you want, but you need more of areason to keep an extra house than it having sentimental value. Will the finances on the renting stack up?

thedon31

I know its not straight forward is confusing me big time.

Basically, I had some defaults in the past but credit rating is still not great as I cant get a half decent credit card still.....no ccj's or missed payments.

From the renting point, on the current mortgage deal if I rented for £600 a month, that would cover the £350 mortgage, lets say the rental company was 10%, that would leave me with 190 profit per month.

GMS

If you borrowed extra on your current deal your payments would rise. You cannot rent without permission and in order to grant permission your lender may increase the rate.

If you were to rent it out without permission you would be in breach of your mortgage terms.

The additional income (if any) from the rental would usually not be taken into account for the new mortgage. The new lender would however disregard the mortgage payment as it would be deemed to be self sufficient (subject to criteria)

You really need to sit down with a broker ad see if this is affordable for you. Get copies of your credit report from Experian and Equifax.

It may not be possible with defaults anyway.

[Deleted User]

Remember to factor in unoccupied months and maintenace etc out of your profit - as well as tax. It may be marginal. Although of course you would still have the house to sell at some point in the future.

thedon31

Ok thanks....I will do this.

If I was to sell the property and have that kind of deposit of nearly 100k, the likelihood of getting a joint mortgage of 150k, is that more feasable?

GMS

thedon31 wrote: »

Ok thanks....I will do this.

If I was to sell the property and have that kind of deposit of nearly 100k, the likelihood of getting a joint mortgage of 150k, is that more feasable?

Caould not say without further information. Depends on many factors.

A 20 minute phone call to a decent broker should be enough to get an idea.

Sorry if that sounds like a cop out but I would not want to say 'yes' without knowing more info.

General rule of thumb is the bigger the deposit the better but as I say there are many factors to be taken into account. Any adverse credit makes it more difficult.

Chinkle

Maybe slightly off subject, but why would you want to rent out a place that has a sentimental value to you? Tenants won't look after or cherish the place you would, they could even trash it.

If you're more interested in making a profit then just say so, that's much more compatible with what being a landlord is all about - turning your property into a business.

herbiesjp

Having a £100k deposit is better than a £30k deposit.

So in that respect, borrowing less, and having a lower LTV will open up more doors for you.

That will be important, if you have a tarnished credit file like you say.

Infact having the bigger deposit may be the only way of being able to buy the new place.

Get copies of your credit file and discuss with a good broker - they will be able to tell you asap which route will be better for you.

thedon31

I am in interested in making progit in the house but I inherited this property and I have also lived there for 27 years myslef. I understand that it could be trashed but I suppose I'm just clinging on to everything i've had there really.

But thanks for all your help everyone...I will talk to brokers but I did figure the only way to this was to sell up/part ex...I just wanted to explore every possible avenue.