BTL Mortgage Advice

stringvest

we currently have a mortgage of £130,000 and a realistic value of £160,000 and we'd like to be able to move but retain this property to let it out.

Ideally we'd like to switch to a Buy to Let mortgage but I'm told we must have at least 75% equity, but others have told me we can do it with 80% (which is where we're at now). It's all getting a bit confusing so I'd be keen to get some advice as to whether this wouldbe achievable??

The rental income would be £675-700 p/m

Do interest only mortgages still exist? Can we simply switch to one to enable us to retain the bulk of the rental income?

Any advice would be gratefuolly received...

holly_hobby

Hi,

Your figs (130/160) give you a LTV of 81% - so you need to adjust your borrowing (if the property does value up at 160K)

The current max BTL LTV is 80% - available with The Mortgage Works and Kensington Mortgages.

Your rental income must be 120% of mge payments with Kensington, or 125% with TMW (your max rental income looks a little tight to be honest, have you checked the market for average rents. Is 700 realistic or undervalued ?).

Notwithstanding meeting criteria, interest only is a permissible option, but you need to consider your repayment vehicle or how you will repay the mge at maturity.

Your min earned income is 25k

Having said that .... have you asked for consent to let from your current mortgage provider ? (they will add a loading to your current residential rate, and probably charge an admin fee). But will save you at this point, having to source a suitable BTL lender/mortgage.

Tax returns are submitted on an annual basis via self assessment - 100% of mge interest may be offset against the rental income for tax purposes (along with other permitted deductions).

Suggest having a contingency fund for repairs, maintenance fees, and other associated costs.

You also need to consider how you will continue to service the mortgage if there are periods of unoccupancy. (or will you be able to comfortably continue to service the mge from your own income without it having a negative impact on your own standard of living ?)

I would suggest seeking advice from a whole of market broker whom is on the panel for the noted lenders, there may be a fee, but they will not only source the mge and best product for you, but also support you throughout the whole application process.

But hope this helps get you strated ..

Good luck

Holly

newDude

holly_hobby wrote: »

Your min earned income is 25k

What does that mean?
Thanks

holly_hobby

The lender requires you to have a minimum earned income of £25,000 (in addition to the rental income requirements ).

Holly

newDude

holly_hobby wrote: »

The lender requires you to have a minimum earned income of £25,000 (in addition to the rental income requirements ).

I thought The Mortgage Works (or someone with similar name) didn't ask for this?

holly_hobby

Sorry I didn't make it clear - 25k is Kensington.

TMW do not seek proof of income, but reserve the right to request

Thanks for pointing that out

Holly

antrobus

holly_hobby wrote: »

...your max rental income looks a little tight to be honest, have you checked the market for average rents. Is 700 realistic or undervalued ?...

What the man means is that £700 per month equates to a 'return' of just under 6.5% on your £130k mortgage. That doesn't leave a lot of margin for error.

stringvest

Hi Holly,

Thanks for the advice. Our previous mortgage deal has ended and we're just rolling on with Nationwide's Base Mortgage Rate - would it be possible to switch this to consent to let?

We've had the property valued for sale and rental and £700 is realistic and a value of £160k achievable.

Will deffo try and get some advice from an independent advisor. We've seen a 'whole market' advisor based at a Reeds Rains agents. Nice guy but his advice was that we had to have a minimum of 75% LTV so his advice seems to conflict with yours and other info I've read elsewhere (i.e. it may be possible to get a BTL mortgage at 80%)...

kingstreet

stringvest wrote: »

We've seen a 'whole market' advisor based at a Reeds Rains agents. Nice guy but his advice was that we had to have a minimum of 75% LTV so his advice seems to conflict with yours and other info I've read elsewhere (i.e. it may be possible to get a BTL mortgage at 80%)...

I have the Kensington criteria in front of me which says their maximum lending for a BTL is 85%. Please note Reeds Rains charges a £299 fee and it will receive commission from a lender as "whole market" brokers will not source from non commission paying lenders. An independent broker will charge you a fee and rebate to you any commission payable and will also consider non-commission paying deals.

Comparison here;-

Using an independent broker may be preferable to a whole market adviser.

Whole market advisers may only select from lenders and products which pay them a commission, while an independent may agree a fee with you and pay to you any commission he receives. If a direct to lender product is better for you, the independent will tell you if that is better as you are paying a fee for the advice.

Here's an example;-

you see a whole market broker looking for a 25 year repayment £150k mortgage on a £200k purchase. You want the best five year fix, regardless of fees. You agree the broker will take commission on any arranged mortgage.

He finds you an Accord Mortgages product at 4.44% fixed until 31/08/2016 at £828.65 per month. The broker will receive commission of £487.50.

You then see an independent broker who agrees to charge you a fee of £299 and to pay you any commission he receives on any arranged mortgage. He also looks at direct to lender deals and explains that in this case, you may get the best deal, but no commission rebate.

He finds you the Accord option, but as you have a fee agreement, he tells you the commission rebate would be £487.50, leaving you £188 better off.

The best overall deal is Yorkshire Building Society's 3.99% fix until 30/09/2016. The monthly payment is £790.93. This is a direct to lender product, so no commission rebate. You've paid a £299 fee, but in doing so, the monthly cost of your mortgage has fallen by £37.72 against the Accord option, saving you £2,263 over the five year fixed term.

I'm sure someone will point out that you can save £299 by finding the best direct deals yourself and that is true. If you have the time and inclination to do that, why bother with a broker at all?

Trollfever

I have the Kensington criteria in front of me which says their maximum lending for a BTL is 85%

Buy-to-let specialist Kensington pulled the last deals on the market requiring only a 15 per cent deposit,

Read more: http://www.dailymail.co.uk/news/article-2041246/Banks-pull-plug-buy-let-loans-boom-flood-applications-landlords.html#ixzz1YxLHZvIB

holly_hobby

Yes Troll - thats correct re Kensington which is why I quoted their max LTV as only 80% (Kings you need to also be aware that they pulled 90% at the same time - midnight last Wednesday to take effect 22.9.11 - you may want to check any pipeline cases you have awaiting offer).

Hope this helps

Holy