2 houses, 1 rented, want to move - looking for options

PJ1973

My girlfriend and I both have properties in our own names.

She lives with me and we rent hers out. The rent covers the mortgage etc but we don't make a profit.

We are thinking of moving (to a bigger house).

There's more equity in her house compared to mind . . . we don't really want to sell, but we might have to get at this equity.

Questions:
- If we need the equity in her house (to get a decent LTV) - are there any sensible alternatives to selling it?
- If we keep the rented house on, will a lender take her income into account when deciding how much to lend?

Welcome any help.

Cheers
Phil

CLAPTON

how much equity does she have in the property
what sort of mortgage does it have ; residential or BTL

Thrugelmir

PJ1973 wrote: »

She lives with me and we rent hers out. The rent covers the mortgage etc but we don't make a profit.

So what's the objective?

If there's equity in the property then using it would make you money by saving interest on borrowed money.

holly_hobby

PJ1973 wrote: »

She lives with me and we rent hers out. The rent covers the mortgage etc but we don't make a profit.

PJ1973 wrote: »

If we keep the rented house on, will a lender take her income into account when deciding how much to lend?

If the rental income is not in excess of 125% (ie - is not completely self funding, which also includes charges incurred in the letting of a property) of the mortgage repayments - the lender may well offset a portion of the mortgage off her income, for affordability on your new property.

Indeed from your own point of view (unless you put rent up as part of any tenancy review), you'll be up the #### creek if mge rates increase, or an unexpected cost rears its head !

PJ1973 wrote: »

There's more equity in her house compared to mind . . . we don't really want to sell, but we might have to get at this equity.

PJ1973 wrote: »

If we need the equity in her house (to get a decent LTV) - are there any sensible alternatives to selling it?

Unless the rental yield improves, you've no chance of having it ignored from her income as it is, let alone increase the borrowing further.

Are you sure that you are achieving the max rental income for the property type and its location ? Of course you would not be able to amend the rental charge until the tenancy was up for review - but if you could increase the yield to at least 125% of mge commitment, then there would be more scope for taking this exisiting property into account, or to have its liability discounted from your income re your primary residence application.

If of course you are receiving the highest rent for your specification, and the mortgage is already on an interest only basis - there is little that can be done to improve the yield for mortgage calc purposes ... or indeed from your own perspective regarding building an emergency fund for property repairs, etc .. so even if you decide not to move, you need to consider whether retaining this property could actually be more hassel than its worth ... ?

Having said that, have a little review of comparibles in your area, and then re-evaluate your situation as required.

Hope this helps (sorry it wasn't all positive .. !)

Holly