A second mortgage

bristolbob_3

Hello,

Im after some advice please as i dont really know where i stand.

A number of years ago I purchased a flat for myself and my partner to live in. After a while we split up and she moved out. Shortly after I choose to move out of the flat and back with my parents.

I have since rented out this flat but never informed the mortgage company.

I now wish to buy a second flat for a small amount. Im self employed and my earnings for the last 3 years should so about £13,000-£15000 pa. I understand this should allow me to apply for a mortgage for around £40,000 which is fine as ive seen a flat im interested in for circa £40,000. Obvioulsy I know I will need to put down around 10% on this.

However, what is my situation with my current mortgage lender and how do I go about getting a mortgage for the second flat as i dont intend to live in it and instead wish to rent it out - do I need to inform a new mortgage company of this fact or also of my first mortgage?

Thank you
Bob

Annisele

Unfortunately I think your situation might be more complicated than you realise.

Firstly, if you bought your original flat on a residential mortgage then you should have asked the mortgage company for permission to let it. It's not just a matter of informing them - the terms of a residential mortgage are that you have to live there, and if you let the property without permission then you're in breach of contract. The lender has the right to say no, or to increase the interest rate.

You don't need to panic too much though. Theoretically if your lender finds out they can demand immediate repayment of the mortgage loan and repossess your property if you can't pay, but that's very unlikely. More of a concern would be that if you didn't ask your lender's permission, there might be other things you haven't done - are you sure that you've complied with all your legal obligations as a landlord?

Secondly, a 10% deposit isn't going to be enough for a buy to let. Usually lenders demand 25%, and they often demand a minimum level of income as well - sometimes around £25k.