let to buy query

moneysavingmanc

Hello all,
Wondering if anyone can help us out?
We're looking into converting the mortgage on the property we live in to a BTL (75% loan to value) so we can rent it, with a view to buying a new property with a new residential mortgage.
Our current salaries (spouse & I) are both 30k per year. We're aiming to have a 15% deposit for the new property. Having sought advice, the only concern is that the debt owing on our BTL mortgage (75% = approx. £85000) would be deducted from the amount we would be able to borrow for our residential mortgage. Does anybody have experience of this. I'm aware that outstanding debt such as car loans are often deducted for this purpose. I've been told that only a small number of mortgage providers actually deduct remaining debt on BROs when calculating the amount they'll lend on a new mortgage.
Any info appreciated.

Thrugelmir

BTL is based on rental income. As a guide being 125% of interest on the mortgage debt at a rate of 6%.

moneysavingmanc

Thanks yep we're ok with the BTL as the rent will cover 125% of repayments and we're both over the 25k wages request that most BTLs require.
Our concern is more about the new residential mortgage that we plan to take out and whether or not the lender will retake into account the debt we owe on our BTL.
Thanks

GMS

As the BTL mortgage will be self financing it should be disregarded as a commitment by most lenders.

You mention BRO. Is this a previous bankruptcy?

Jimbo1976

It is probably worth speaking to your existing lender before you remortgage onto a buy to let. Depending on how loan you've had your loan they may allow you to keep the same rate for a period, or at worst increase your interest rate. Whilst some buy to let loans come with remortgage packages (freebie conveyancing and survey) typically the fees with BTL loans are pretty significant

As Thrugelmir and GMS have said as long as the original property finances itself (your new lender may want to see something to prove this) then it should disregard the cost of the existing mortgage (either as it stands now or on a new BTL basis) from any affordability calculations.

moneysavingmanc

Thanks guys. Apologies that was a typo, it should have read BTL, no bankruptcy or any history of bad credit. Thanks would be grateful to hear if anyone has been through this or similar experience.

Wh05apk

You shouldn'tneed o convert to BTL, you should be able to let "consent to let" from your lender, this will normally only be for a short term, but will keep you on your current rate (possibly + a little) rather than a more expensive btl.

moneysavingmanc

Thanks Who5apk. Consent to let is an option with our current lender (+0.75%) however am I right in thinking that it would have to be converted to a BTL once we take out a new residential mortgage as you're only allowed one residential mortgage at any time?
Thanks

Jimbo1976

It would not need to be converted. You can have more than one residential mortgage.

Are you saying that your existing lender will just increase your rate by 0.75%pa. If so what is your new rate?

moneysavingmanc

Current rate 4.99 so 'consent to let' rate would be 5.75%. Can you really have a resendential mortgage on consent to let basis AND a normal residential mortgage where you live?

Jimbo1976

Yes, you can. The definition of the loan you are taking out depends on what you are doing with the property when you take it out.

Don't get too hung up over names for loans. As long as your existing lender is happy for the property to be let out and as long as your new lender is happy that the rental will cover the mortgage plus some extra (the 25% you explained in one of your earlier posts) then don't be worried.

Are there any time restrictions on the consent to let your lender is offering you? 1 year 2 years etc