Obtaining a small buy-to-let mortgage circa 75k

MsConstipatedPiggyBank

I've been saving money for some time and also have inherited a small amount of money, such that I've in excess of 30k saved up. I've no credit card debt, and no outstanding loans. I earn about 30k per year.

I'm looking to invest in a small buy-to-let property with a mortgage that's low enough that I could cover tenant absence, tenant non-payment of rent etc. and a few days ago, I found an ex-local authority property with a 9% return at 100k, which was being sold with a new tenant in it (no sitting tenant, in excess of 100 yr long lease, no asbestos etc; I checked all of the obvious issues). I contacted my company mortgage advisor, only to have him say that the products he could look at were limited and when he came back, he said he had been unsuccessful in finding a suitable buy-to-let mortgage product. In the end, I was pipped at the post by a cash buyer, and I know my offer would probably not have been accepted, so no worries.

I don't currently have a mortgage and am in the fortunate position of informally renting a property from a good friend so I don't need a property to live in myself. Consequently, I applied for a mortgage in the region of 75k over 25 years, but was turned down on the basis that:

a) The property was ex-local authority (6th floor)
b) I didn't have a mortgage myself at present.
c) The amount I wanted to borrow was too low.

Now I feel that I'm a very safe pair of hands. I've worked in the property industry for some years. I'd worked out that I'd need a small mortgage and could pay it off (since I've no mortgage liability myself), even if my tenant for some reason refused to pay after service of notice etc. Apparently, not having a mortgage oneself is viewed negatively by mortgage companies (they've got nothing to claim against I suppose).

I feel that wanting to borrow a small amount of money over a long period is fiscally responsible. I need to know that I can pay it back myself, even if I end up unemployed, and I worked out that if the rent more than covered the mortgage, I could afford letting agent fees, service charge, costs for refurbishment or sudden maintenance issues etc as well as being able to save up for times when I might not be able to find a tenant. But the mortgage companies don't seem to think that's a good thing!

I can keep saving, but if I keep saving, I'm going to need even less money on account of the fact that I'll have an even larger deposit. Let's face it, I don't think I'm going to be able to afford an entire house, so what options have I got for obtaining a small mortgage? Has anybody else faced this issue? My salary won't let me borrow more than about 90k, but I don't want that much anyway because I intend to buy something under 100k and I have a 25% deposit.

Thrugelmir

Why do you not buy your own property to live in?

Far more tax efficent than a BTL and more financially savvy.

MsConstipatedPiggyBank

I currently take care of a property for a good friend at minimal rent. I'd end up paying off a larger mortgage for a smaller property than the one I live in. My thoughts were that with a BTL, somebody else would pay the mortgage!

Also, my hope is to make a major career change at some stage, and I don't want to be saddled with a mortgage that might prevent me returning to education.

herbiesjp

MsConstipatedPiggyBank wrote: »

My salary won't let me borrow more than about 90k, but I don't want that much anyway because I intend to buy something under 100k and I have a 25% deposit.

A BTL mortgage amount is not agreed on the basis of your salary, but on the basis of the expected rental income for the property.

You have also come up against the various hoops to jump through in terms of lending criteria - and been turned down in the process.

If you are 100% certain you want to go ahead, I would suggest getting in contact with a good whole of market adviser to see what can be done (if anything at all).

MsConstipatedPiggyBank

My company mortgage advisor also mentioned that BTL wsn't done on salary, but on rent, and the monthly rent on the property I mentioned was £875pcm, so I felt any mortgage would have been well covered, even in the event of severe interest rate rises.

Obviously, I'm not 100% certain I want to go ahead on this property on account of the fact that I had to submit my offer by the end of yesterday, and with no mortgage in place, I couldn't offer.

I assumed that most mortgage advisors had access to the same range of mortgage products on the market, but maybe not. Is it possible (or advisable) to agree a mortgage in principle, even with no property on the cards? I don't want to hit into the same problem again that I've found a property, but can't finance it.

Thrugelmir

Try the Mortgage Works or the Post Office for starters. That'll give you an idea of lending criteria for BTL, together with interest and fees.

herbiesjp

Indeed - speaking to a good whole of market adviser, you will be able to find out whether or not your scenario is possible.

23rdspiral

i can understand why you think this is a good idea, and also why you are miffed that they aren't happy its a small amount! i'd be interested to hear how this progresses. good luck.

MsConstipatedPiggyBank

Thanks for those suggestions, Thrugelmir, I'll go and explore the lending criteria and see how/if I might fit them.

I hope that my company market advisor was a good "whole of market" person, but I'll soon find out if not.

I'll keep everyone updated about it goes. I've tried googling for "small mortgages", but seems the mortgage companies hate these. I'd still have thought that lending a small amount (with smaller interest) to a safe buyer was better than lending a large amount (with associated larger interest) to a dubious buyer. The problem is that the whole system (ISTM) is still geared towards risk.