Mortgage advice please

Smartie2004

Hi,

We currently live in an apartment, worth £100,000. I own it outright. We need to move as we are expecting a baby.

I earn £21,000. However, I have £100,000 behind me in the apartment, plus a deposit of £16,000

Ideally, I would like to rent out the apartment.

This would mean, I would need a mortgage £150,000

My credit file is spotless.

Do you think lender would do it?

I know £150,000 would be alot on my income but....i will make a good rent on my apartment, and have another £16,000 to give as deposit.

My partner earns a bit more than me, but she has a bad credit history (a DRO 4 years ago, so she is out of the equation). I'm hoping we could manage by renting out apartment. If not, I guess I'd have to sell up so only be applying for about £25,000 mortgage. This would take a while though, and the house we love is waiting for us.

What do you think?

GMS

You could look to remortgage the apartment on to a Buy to Let mortgage and put the raised money towards a deposit on the purchase.

£150,000 is probably stretching it on your income but if you could release say £60,000 on the flat it could help.

Have a chat with a broker to see how you could proceed.

ACG

I agree with GMS.

If your looking to do this on your income alone, then your only option to get that amount is to remortgage your existing property on a BTL mortgage. Then taking out a seperate mortgage based on your income.

kingstreet

To a certain extent, the rental income and realistic value of the flat are going to drive this proposition.

Lenders tend to like the rental income to exceed the monthly mortgage interest by around 25%, to 30%, at a rate of 6%, to 7%pa.

So, if your rental income is likely to be £500 per month, the mortgage interest could be upto £384 per month, allowing you a BTL mortgage of upto £65,800, using that 7% annual rate. That sounds ok. Under 70% LTV if the true value of the flat is £100k.

After paying fees and your cash deposit, that should leave you around £75,000 deposit for your home purchase.

With an income of £21k, assuming you have no credit commitments, you should be able to get a residential mortgage of around £80,000 without too much difficulty, providing enough to purchase the property you desire and to cover the purchase costs.

A good whole of market or independent broker is the best option for this as it needs an eye for a detail to run the remortgage and purchase mortgages side by side.

Before you do anything else, check your lease permits subletting. You may need to check this with the freeholder.