Advice Please - Losing Buyer putting my home on buy to let?

dave4343

Hi All,

Hoping someone can advise me so that I am clearer before I contact my lender.

Have had an offer on a property accepted and have just had mortgage agreed for £169,000 for purchase price of £212,000.

Potentially, I can see a problem with my buyer and to cover all my bases just want to tap into peoples knowledge on buy-to-let - rather than lose new home!

Can I transfer my existing mortgage of £127,500 to a buy-to-let and at the same time adding £30,000 to it towards deposit for new house (have £13,000 of savings).

At last valuation recently existing property was valued at £185,000. Rental rate for this property would be £900 - £1000. Also have potential tenants in place.

Would I need to re-apply for the agreed £169,000 mortgage and if so could you foresee any problems with the application in light of all of above.

Thanks for your time and reading.

Dave

kingstreet

If your new mortgage has been underwritten on the basis the old one is paid off, it will need to be re-underwritten to establish the lender will be happy with the old mortgage continuing and being increased.

Some will accept it, some won't.

Your BTL application will need to be less than 75% loan to value and the rental income will need to be 130% of the monthly mortgage interest, assuming an annual rate of 6%.

With an LTV of 85%, £157k on £185k is too high. £138,750 is the realistic maximum. A mortgage of this amount will have an interest cost, at 6%, of £694 per month and will have a required rental income of £900.

I suggest you discuss this case with a whole market or independent broker as it will require some pre-planning. You may also need to increase the new purchase mortgage to reflect the lower LTV of the BTL proposition.

dave4343

Hi Kingstreet,

Firstly thank you for a quick response, really appreciated.

Nat West are my lender, on looking at their website they have a BTL mortgage for existing customers at 15% LTV, so at 157k it would be coming in at correct LTV, but I bet there is certain criteria to be entitled to this LTV rate?

Are there any others alternatives available to me?

Thanks in advance.

Dave

Jimbo1976

I think the NW buy to let rate you are referring to is a 5-year fixed rate at 5.99%.

The monthly interest rates on this on a loan of £157,000 would be £783.

As Kingstreet has suggested some lender require a surplus of 25-30% of rental over the mortgage payment.

From memory NatWest used to want there to want rental cover of 125% against an interest payment of 7% (unless you earn more than £50,000 excluding rental income). 125% at 7% on £157,000 is £1144pm which is a lot more than the projected rental you are taking about. In my experience the projected rental value that you get from letting agents tend to be on the high side (as they are trying to win your business)

I suggest you speak to a broker, you may be able to remortgage to raise some of the equity for your deposit and also increase the size of your proposed new mortgage. Also speak to NatWest to confirm their rental requirements if you try to switch your existing mortgage with them onto a buy to let loan