Renting out current home? Getting mortgage to buy again?

QTPie

Currently looking to move: trying to sell, but our "sector" of the market is not moving much. If house doesn't shift in the spring, looking to investigate options....

We have mortgage on our current property (about 30/40% of the value). Rental income would cover mortgage payments (I appreciate that there is obviously no guarantee that we would rent it out). Current lender routinely offers permission to let (at current rates and without a problem).

We would have a 30/40% deposit for the new house. How would owning and renting out the current property effect our maximum mortgageable allowance (I.e. based on our salaries)?

Thanks
QT

Dave_Ham

It will depend upon the chosen lender for the new purchase.

Some will disregard the mortgage commitment entirely so would not affect you, others will include it in full.

Typically, the top rated lenders like Britannia, Co-Op and HSBC would not disregard the commitment as they would want to see it rented for 6 months+ and proven.

It will therefore be a balance between income, lending requirements and rate optimisation.

All the best

QTPie

Thank you very much.

That might be a pain - was thinking of Britannia (since they are who we already have our mortgage with): had hoped that might make things "easier". Might go into Britannia to ask anyway. HSBC and Lloyds are two other lenders that we have "good relationships" with.

Any idea of lenders that would be more likely to disregard?

QT

Dave_Ham

I would definitely check with Britannia as being an existing client may well help.

If you check policy they should not re-credit check you, so ensure they do not do this unless you look like you may fit.

With any bank they only have one set of products and add in they are targetted on applications sometimes gives mixed results.

These lenders do not take applications from brokers, so we are less likely to know their criteria although usually they want more reassurance around consent to let properties..

Good luck - be interested how you get on.

QTPie

Thank you very much.

In many ways I would rather sell (simple life), but property market is very patchy here (and we are in a good area) - so it may be better to keep the current property for a few years or so (possibly even longer term).

We are financially very stable and the in-laws want to gift us a large deposit. However, I know that gifting large deposits has its own problems (i.e. money laundering being flagged up - especially with the money coming from abroad, the family is based abroad).

I will have to pop in and speak to someone - just to see where we stand. Although I do worry that the "branch - front office staff" are sometimes on a different planet to the "head office - mortgage processing specialists"...

Dave_Ham

Many clients have become accidental landlords over the last 2 years and yes source of deposit can be topical.

I wish you well.

gastroboy

Just went through the same thing. Basically this is what I found out over the two weeks of ringing around.

1. Your current mortgage will affect how much you can borrow as most banks I came across must count the current debt and cannot count the potential rental income until you have rented for at least 6 months.

The exception was Halifax (they disregarded it on the basis that it was likely the rent would cover the mortgage).

2. Gifted deposits are ok, you just need a letter from the parents to say it's an unconditional gift (no obligation to repay and no interest in the property).

3. Go into the branch if you can. Getting one point of contact is much better than having to call a number and quote a reference. You won't have direct access to the main mortgage guys at head office so it's best you can contact someone directly who can (i.e. the branch person).

Good luck.

somethingcorporate

Your current lender may not offer you a new residential mortgage. We got C2L on our first property from BoI but they would not entertain an application for another mortgage on a different property - regardless of income or rental situation.

They were fantastic with the whole C2L situation so big thumbs up to them though.