Likely mortgage lenders

Robbie200

Is anyone able to offer advice on lenders who would be likely to look favourably considering our circumstances please?

We have now seen a property we like which is on the market at £235k. We can place a £30k deposit so we're looking to borrow around £200k (around 87% LTV).

We currently have a mortgage free home worth approx £120k which we wish to rent out and should see £550 per month rent. Mortgage was paid off over 12 years by overpayments (finished 2 years ago). I know I could get a BTL mortgage and claim tax relief on the interest, but I'd prefer to keep this house unmortgaged for the time being. We have no other unsecured or secured debt (only credit cards which are cleared every month).

Is rent likely to be taken account of when assessing income? Initial searches would suggest we are able to borrow £210k to £290 (depending on lender) without taking account of rental income.

I think initially we would be seeking a fixed rate mortgage over 2 - 5 years to give confidence (to us) we could manage repayments.

I don't really want to have numerous refusals on my credit file and would be keen to understand which lenders would look favourably on our risk profile (we're both PAYE employees with 2 and 6 years service).

Dave_Ham

Hi there,

It would appear most lenders with some obvious exceptions from the likely lads would accept you on standard terms.

I would be worrying more about the rate and tax implications of sticking to your original plan. I fully appreciate that you seem clear on the way to attack this, but...

Aside from the tax savings, on your new place you will achieve 90% rates which are considerably higher than some of the lower LTV counterparts. You may want to consider taking some funds from current property to achieve a better rate on the bulk of your borrowings..

Obviously there are a few calculations to undertake and would suggest you get professional advice...

All the best

The_J

100% agree with Dave, would advise small mortgage on BTL and better LTV product on residential. The tax and interest savings will be significant.

Robbie200

Thanks for the suggestions guys. I guess we really need to see an advisor as like you both state, it may be more cost effective to get a BTL on the current place meaning a smaller mortgage (at a lower LTV) on the new house. If this lower LTV allows a lower iterest rate it will mean the higher rate of the BTL mortgage will be offset somewhat; coupled with tax relief on the BTL interest.

We are both basic rate tax payers (although only just). Next year I'll likely be paying 40% tax and the tax relief will be greater. Is it correct to assume tax relief is claimed at the highest rate of income tax paid?

Thrugelmir

Robbie200 wrote: »

Is it correct to assume tax relief is claimed at the highest rate of income tax paid?

There's no tax relief as such. Interest and other allowable tax deducible expenses are taken into account when calculating the taxable profit.

The taxable profit from the property letting will be added to your income from other sources, and tax charged accordingly.

Robbie200

Gotcha. You just deduct the interest payment from the rental income when calculating profit.

Many thanks