90% LTV with a mortgage outstanding?

Vyncenze

Hi all

We accepted an offer for my partner's flat last month, which has today been withdrawn (problem with their finances, apparently). It took us 6 months and a couple of price reductions to get that offer, so we might be waiting a while for another.

The place has been marketed at 100k, down from an initial 110k, and we accepted an offer of 96.5k. My partner owes 89k on the mortgage, which is now on the SVR.

We are very keen to move now (not getting any younger!), so we're considering the option of renting it out. We've found a place (probate sale) that we'd like to buy, but I am not clear how achievable this is - any advice would be much appreciated:

Local agents tell us we could probably get £575 rent per month, which would just about cover the existing mortgage. We would have to speak to our current lender (Santander) and ask them to grant us permission to rent out. Assuming we got it, are there lenders out there who would grant us a new mortgage at 90% LTV with the current one outstanding? Further question - would we have to move out and rent it first to have 3 months (or whatever)proof of rental income, or would anyone accept it based on the "estimated income"?

In terms of affordability, our joint earnings are just under 75k, and we'd be looking to borrow around 180k for our new house. No adverse credit, although I do have a balance on a credit card and I know this would factor into affordability.

I realise no-one can advise specifically, but is this potentially doable, or do you think our only option to reduce the sale price of the flat still further and get out?

Many thanks

Joe

Vyncenze

Let me rephrase the question (which was overly long-winded).

Is there any chance that we will get a 90% LTV mortgage on a house at 180k, with the following:

Joint income 74k
Outstanding mortgage of 89k on a house valued at 100k (on SVR at about 4%, so costing £600 per month)
Credit card balance of 9k
Credit ratings otherwise all good.

If the answer to that is no, would it still be no if we paid of the card debt before applying?

Will the lender just take existing mortgage payments off the affordability?

Cheers

LEP

I did something similar recently but I had a lot more equity in the property I am now renting out (35%) and a 15% deposit.

The first step is to see if Santander will give you consent to let and if they do will they add to the interest rate.

I am sure no mortgage provider will take into account potential rent covering your current mortgage and therefor this will be taken into account as a monthly outgoing with regards to affordibility.

Stick the figure in some calculators and see if they pass....

Vyncenze

Thank you for that. I have tried the Nationwide and YBS calulators, both said we could borrow well over 200k, even with an outstanding mortgage costing £610 a month and the credit card debt. Seems too easy though, so I wanted to see if it really is realistic...

My thinking is that we could go ahead with the probate property without any rental income - then we can either keep trying to sell the flat or rent it out short term (if Santander agree). Obviously it would potentially cost us a bit, but it looks affordable to me and at least we could get on with life...

Wh05apk

90% with a retained mortgage in the background will be difficult, Nationwide for example will only do 85% for a "second" property.

Possibly resricted to Woolwich/Halifax out of the big lenders.

Vyncenze

See, thought that sounded too good to be true!

Thanks for that info re Nationwide. This is why I don't trust the affordability calculators, you put all the right info in (inlcuding LTV and monthly mortgage commitments) and there's no warning at all about that.

Vyncenze

So, if I could get (probably as a gift) enough deposit for 85% LTV on the new house, will it be relatively doable to take on a second residential mortgage?

Can I just treat the first mortgage as an "outgoing" for affordability?

Wh05apk

Vyncenze wrote: »

So, if I could get (probably as a gift) enough deposit for 85% LTV on the new house, will it be relatively doable to take on a second residential mortgage?

Can I just treat the first mortgage as an "outgoing" for affordability?

Again it depends on the lender, some will ignore if an "assumed" rental value covers the mortgage by 20-30% some will only ignore once the property has been rented and you can proove rental income.

If your income is enough to cover both then yes, you should have little trouble.

Remember affordability calculators only look at affordability, they do not take into account whether you fit other criteria.

Given the potential issues, it would probably be best to use a broker, and ensure you emphasis the second property etc, as some may "forget" the relevance.

mrchiggles

I was in an uncannily similar situation 3 years ago. HSBC lent to me on a 90% LTV on my main house whilst still having a flat (with no tenant, etc so all outgoings for me) mortgage of around £100k.

Vyncenze

Thanks both for the input.

It's not the ideal solution, obviously, but if this probate house turns out to be perfect for us I might have to look at that option (no renting, just having two mortgages for a while).

Presumably if we don't let the old place out, we don't need any permission from the lender to move in to somewhere else? It can sit empty without any issues?

mrchiggles

Vyncenze wrote: »

Thanks both for the input.

It's not the ideal solution, obviously, but if this probate house turns out to be perfect for us I might have to look at that option (no renting, just having two mortgages for a while).

Presumably if we don't let the old place out, we don't need any permission from the lender to move in to somewhere else? It can sit empty without any issues?

That's a funny one - I noticed in my T&Cs on the flat it said that it had to be my main place of occupation or words to that effect, I assume to stop people using the mortgage to buy a holiday home, etc. Have to admit I didn't tell them...