Mortage application and credit rating

Sparky29

I have a mortgage-free property 300 miles away that I let out and have no intention of ever living in it again. I currently live in a rented property that is tied to my job and I will have to move out in the next 12 months.

My house is worth about £160k and I intend to mortgage it for £100kish to raise funds to buy another house to live in.

Is this the right thing to do?

Will applying for 2 mortgages close together affect my credit rating and prevent me getting the second mortgage?

Thanks for any help or advice

kingstreet

So you want to remortgage the rental onto a BTL product to raise a deposit for a new residence and you also intend to raise a mortgage on the property to be purchased too?

Can't see anything wrong with that.

For the BTL, you'll need to take the interest payment at 5%, then multiply that by 125% to get the rental income you're likely to need.

For example, £100k @5% = £417 per month x 125% = £521 pm rent needed. As long as the rent is equal to, or greater than that, you should be fine with the BTL.

As for the purchase, that's going to depend on how much you need to borrow and your income. 4x income is pretty much standard (not forgetting to take off deductions for dependents and credit with more than 6 months left to run). Some lenders will also "charge" you for the cost of the BTL and won't take the rental income into account in calculating how much you can borrow on the purchase.

A good independent or whole market broker would be a good first point of contact in putting these two propositions together for you properly.

herbiesjp

As stated above the scenario is simple enough.

However there are certain areas that can trip you up along the way.

Just to be clear the 5% rental coverage is one example, of a rental calculation. Different lenders work in different ways, so one lender may want less, and another may want more coverage.