Complex situation?

meemawuk

Hey. I'm looking for some advice on what seems to me to be a compex situation but probably isn't really.

I have mortgage on a flat but in around a years time I would like to buy a house with my partner. I would however also like to keep the flat.

By the time it comes to buy the house, i should be at around 75/80% LTV on the flat and with the interest rates as they currently are, the rent will easily offset the monthy mortgage payments whilst accounting for tax. Putting me in a position where I'm freerolling the flat (albeit with the exposure to risk).

My question is, at present I don't think the bank would lend me more money to move since I couldn't pay much more than I am now. But with the rental income would they consider lending me more?

Could I run a mortgage calculator with my salary plus rental income, see the maximum I could borrow, and then subtract my current outstanding mortgage balance or repayments? Would this be accurate?


Any advice would be helpful. Obviously I'll need to speak to a mortgage advisor also.

ACG

Lenders look at this in different ways, some would expect your income to cover both which is fairly unrealistic for most people.

Some lenders wont mind so long as the rent covers the mortgage other lenders have different views.

Speak to your existing lender and ask what the charges will be if you obtained consent to let on your property - some will increase the rate and/or charge a fee - so make sure your budget covers that.

meemawuk

Thanks. My fixed rate comes to and end around this time so it might be possible to remortgage as BTL rather than modify my current mortgage. I just wonder how this might impact on what I could borrow to invest in a property in which to live.

Also, is it best to keep two separate products 1 BTL and 1 normal? Or is it even possibly to combine btl with 'live in' properties in 1 product.

ACG

you would need 2 separate products.
You could look at BTL, but you also may have the option of consent to let - so you can see which is the better option at the time.

Wobblydeb

We were in a similar position (fiance has a flat), but managed to arrange our mortgage without any hassle.

The mortgage on the flat is still at 2.9 times his sole salary, and between us we have agreed a new mortgage at 1.7 times joint salary. We have agreed that it will move to a BTL / consent to let mortgage after completion. They (Post Office / Bank of Ireland) wanted full details of the outstanding mortgage etc. but otherwise it didn't cause the problems I was anticipating.

meemawuk

Hmm. 1.7 x joint salary seems a bit low. Is that standard or just the amount you asked for?

Wobblydeb

meemawuk wrote: »

Hmm. 1.7 x joint salary seems a bit low. Is that standard or just the amount you asked for?

That is the amount we have asked for. I mentioned the low multiple, as it might be one of the reasons we have been able to get the new mortgage.

Thrugelmir

meemawuk wrote: »

But with the rental income would they consider lending me more?

The rental income is not guaranteed. That's the issue for any lender. So if the property was empty or the tenant defaulted. Then you would need to fund the mortgage (plus other outgoings).

As long as there is a mortgage on the property. Then the rent would be discounted.

holly_hobby

Portion of rental income (if not a prof landlord), only generally possible if the let property is unencumbered (mge free).

As said, as long as the let property is self sufficient, then generally this will be set aside re affordability purposes on your residential application (nb - lenders may require sight of an AST and confirmation that it is let with the current mge lenders permission. You also need to consider that there are some lenders, such as HSBC, whom will include the current mge commitment within your residential mge affordability assesment ..... SO if income is tight be mindful of whom you select to proceed with, and to that end a broker may be invaluable to your quest !

Moving back to the let property - withdrawing equity out of it via a BTL remortgage and as a first time landlord, you'll generallly be restricted to a max 75% ltv - so given your current estimate of LTV, CTL may be the only route (at least until LTV improves and/or you can demonstrate some landlord experience).

Hope this helps with the basics

Holly x

meemawuk

Thanks Holly.

If I understand correctly, as long as I can get CTL and prove that the property is self sufficient, there will be SOME lenders who will set aside the borrowing on this property and lend me more or a property in which to reside?

This kind of seems what I'm looking for. Although I'd be a first time landlord, I have spoke with the landlord of the 2 other apartments on my floor who said he has never been without a tenant for more than 1 full week since he bought the properties 8 years ago. I have no worries about getting tenants in.

I will speak with an advisor and see what they would suggest.

Thanks a lot for your knowledge!

kingstreet

No mention of deposit for the purchase yet.

Some lenders limit the maximum for a second property to 80% or 85% so be careful.