BTL mortgage question

sympatex

Hi all,
I have a query as to whether mine and my gf's plan will work as i do not know the rules around BTL and current attitude to lending on such products by the mainstream lenders.

Currently we are in the process of buying the flat we have rented for 1 year. We originally intended to rent until we found somewhere to buy (3bed semi, driveway etc) but the landlord chose to sell up 8months into our rental. We hadn't found a property in our price range! We showed people around but noone put in offers until the LL reduced the price substantially, then quite a few came in. At which point we decided we could afford it by only using some of our deposit that we had saved for a house.

We have been able to put down a 25% deposit on the flat which has granted us a decent rate mortgage at 2.75%. This means our rent has gone from 700 to 220. (that's interest only like for like comparison but we will infact be on a repayment mortgage of 440).

With the extra money we save each month between mortgage and rent we plan to boost our now depleted deposit.

So the question is, in a couple of years time, will we be able to remortgage to a BTL one and then buy a 3 bed house that we originally wanted to buy. What's the current lenders attitude to this at the moment?

We both have salaries of 28k and would probably supply at least a 15% deposit on the new 3bed home. Having a BTL mortgage and a residential one i am concerned that we wouldn't qualify on affordability.

If we can't, we can't and we'd simply sell the flat. We'd just like to keep it if we could as a future income.

Thanks for any responses.

We intend to use the future rent to cover the hopefully cheap mortgage and subsidise her should we have kids in the future.

GMS

A BTL mortgage would need to be self financing, i.e rental cover mortgage payments plus x%.

If you apply for a residential mortgage and have a BTL it will usuallybe ignored for affordability purposes subject to meeting lender criteria on rental.

This is today, impossible to say what will happen in 2 years but this is the way it has been for a long time.

sympatex

GMS wrote: »

A BTL mortgage would need to be self financing, i.e rental cover mortgage payments plus x%.

If you apply for a residential mortgage and have a BTL it will usuallybe ignored for affordability purposes subject to meeting lender criteria on rental.

This is today, impossible to say what will happen in 2 years but this is the way it has been for a long time.

Thanks GMS, who would need to provide the BTL lender information on its likely rental income? EA, valuer?

I doubt us saying "we rented it for a year before we had the carpet sold from underneath us" would help! heh.

If what you say is the case now, and fingers crossed it didn't change, hopefully this wouldn't be too hard to arrange which is brilliant.

GMS

sympatex wrote: »

Thanks GMS, who would need to provide the BTL lender information on its likely rental income? EA, valuer?

I doubt us saying "we rented it for a year before we had the carpet sold from underneath us" would help! heh.

If what you say is the case now, and fingers crossed it didn't change, hopefully this wouldn't be too hard to arrange which is brilliant.

A lender who would do a BTL mortgage would send a valuer out to the property to get a valuation (obviously) and also provide a figure for expected rent. This would be used in the calculations.

Nearer to the time speak to a 'Whole of Market' broker.

Good Luck

sympatex

Ok thanks very much for your help. I don't know anything about BTL mortgages.

dimbo61

The bigger a deposit you can put down the better mortgage deal you can get !
Now if you overpay each month once you own the flat then you will build up more equity in the property and owe less on a mortgage.
BTL lenders want you to have 25/40% equity and show that the rent is 125% of the mortgage so the smaller the mortgage the better.
If in a couple of years you cant get a BTL mortgage and buy your 3 bed semi then its time to sell and use the equity in the flat to put down on your next home.

sympatex

dimbo61 wrote: »

The bigger a deposit you can put down the better mortgage deal you can get !
Now if you overpay each month once you own the flat then you will build up more equity in the property and owe less on a mortgage.
BTL lenders want you to have 25/40% equity and show that the rent is 125% of the mortgage so the smaller the mortgage the better.
If in a couple of years you cant get a BTL mortgage and buy your 3 bed semi then its time to sell and use the equity in the flat to put down on your next home.

Dimbo,
yeah we'll hopefully be able to do that, in a normal month then it wouldn't be a problem. Though sometimes it's not a normal month and its things like car mot, servicing, insurance, christmas, birthdays, holiday etc that get in the way! it's our plan (we have an offset mortgage) to build up about 200£ overpayments per month. We will see how it goes!

Thrugelmir

I would focus on what you've just bought before getting carried too away.

Pay down the mortgage on the flat as fast as you can. Then reappraise the situation in 3 years time.