mortgage company decision on allowing us to let our house

Trasijocha

Wonder whether anybody can help? I`ve informed my mortgage company that I wish to let out my house and they are going to make their decision on the following considerations:

1. The outstanding balance compared to the value of the house
2. The reason why we are letting
3. The monthly rental income compared to the monthly mortgage repayments

What factors could cause them to not allow us to let the house?

any information would be very much appreciated.

BitterAndTwisted

Trasijocha wrote: »

1. The outstanding balance compared to the value of the house

They will be looking at 25% LTV as a bare minimum

2. The reason why we are letting

having to move with your employment or just want to rent a bigger house. Things of that nature.


3. The monthly rental income compared to the monthly mortgage repayments

They will be wanting the average local rental-rates to be 125% of your mortgage payments.

What factors could cause them to not allow us to let the house?

You have just enumerated them! I'm not sure what other factors the mortgage-lender may think up. Some residential mortgage-lenders do not want to get into the Buy-To-Let mortgage market as the risks are entirely different and much greater for them.

IveSeenTheLight

Trasijocha wrote: »

Wonder whether anybody can help? I`ve informed my mortgage company that I wish to let out my house and they are going to make their decision on the following considerations:

1. The outstanding balance compared to the value of the house
2. The reason why we are letting
3. The monthly rental income compared to the monthly mortgage repayments

What factors could cause them to not allow us to let the house?

any information would be very much appreciated.

1) Important to know the LTV to ascertain the risks

2) Many lenders will allow a temporary let of a property depending on your reason. Temporary could be a couple of years and is only temporary as usual BTL mortgage products have a higher mortgage rate than standard residential mortgages (they want their cslice of the profits)

3) Usually the comparison is rent to mortgage interest (not repayments), although as this is against a residential mortgages property, they will be assessing whether the rent likely to be received covers the repayments

BitterAndTwisted

When did you buy the property?

How much did you pay for the property and how much of a deposit did you pay?

Have you been overpaying the mortgage since purchase?

What is the current valuation?

What are average rents in the same nieghbourhood for similar properties?

Is this a popular area for rentals?

Have you spoken to any of the local letting-agents about average rent?

Trasijocha

Hi
The property was bought in 1998.
We paid £65,000 for it but have re-mortgaged in 2007
The property is currently worth about £190,000 and we have £119,000 to pay
We have overpaid the mortgage at times but have the facility to withdraw the overpayments which we have done over the years for home improvements.
Our monthly mortgage repayments are £793.00 per month and the average rents in my neighbourhood are £850

BitterAndTwisted

So, you've been using the property as a virtual ATM?

You still have enough equity to satisfy your mortgage-lender but the proposed rent may not give you enough of a margin to be safe unless you have substantial savings if the worst happened. Naturally, the factor of paying for another property to live in and your other liabilities will also come into play.

It might make more sense to sell up.

sharpee

So your Mortgage repayments are £793

Estimated Rental Income £850 per month

Does that give you a large enough margin to cover things like:

• Landlord Insurnace
• Management fee if you emply a LA
• Gas Safety Inspection & Certificate
• Any Maintenance charges
• Covering void periods
• Covering non payment from tenants
• etc etc

Not to mention doing your Self Assesment. If you were to employ an Accountant for that (although you can offset this)

I personally would sell up as the figures don't add up

Trasijocha

The property we will be moving into will be rent free so we`ll be £793.00 per month better off, surely they would take that into account?

BitterAndTwisted

You won't be £793 a month better off once you've paid for all of the expenses entailed and paid income tax on the rental-income.

Has becoming a professional landlord ever been part of your long-term investment plans?

G_M

Trasijocha wrote: »

The property we will be moving into will be rent free so we`ll be £793.00 per month better off, surely they would take that into account?

Is the new place also mortgage free?

And is the £793 interest only or repayment?

Have a read here for more info.

clutton_2

i think a lender would take into account the mortgage free future living expenses.. a new set of criteria has been issued today by the FSA to try to regularise mortgage products and criteria... talk to the lender i would go in to the local office and talk with their mortgage guy/gal in person taking proof of all these figures with you and ask....