Complicated mortgage...

JuniperJane

Hi,
Please forgive the long post. This is my first one after trawling through the boards looking for some advice.
We have got ourselves into a bit of a mess. The situation is as follows:
Husband and I have ltd company together of which we are both directors. We have 2 years accounts. We both have excellent credit scores.
We currently live in a 3 bed semi and have recently had our 4th child. Our house is too small for us. We had it on the market for a year but it failed to sell so looked into the possibility of renting it out.
We went to see an IFA. Our mortgage was on a rubbish rate as we hadn't wanted to be tied into a new one if we were going to sell. He advised getting a new residential mortgage and then changing it with consent to let, saying that we just changed our minds about staying there. He said it wasn't illegal just not necessarily the done thing. We have found a house we are desperate to buy. It wasn't on the market yet, we just came upon it by chance and really don't want to lose out on the opportunity. We have a 10% deposit to put down.
Our broker recommended 2 mortgages for us and said to apply for the remortgage first and then the second mortgage. The remortgage has taken a lot longer to complete than anticipated. So much so that we have managed to find a tenant for our house already who wants to move in asap. Will we be able to change our remortgage to a CIL this quickly as I don't want to rent it out without it being legit? I feel our brokers advice was more about what we wanted to hear rather than what is actually practical. Naively I didn't really understand what he was saying so didn't question it. If we are able to change the mortgage over it would be a very similar rate to changing via our existing mortgage provider. When we change over to CIL, because the new mortgage company valued our house at less than we thought it was worth, we don't have as much equity in it as we thought (20% as opposed to 25%) and the rent will not cover the mortgage. Financially this is not a problem, we can cover both mortgages if necessary but will this effect our chances of getting CIL and if we don't get it what will happen?
I am now also worried that the second mortgage will be in jeopardy. The broker said we meet all the criteria but what if they question the consent to let issue and we haven't got it sorted yet?
I feel really stressed out by the whole situation. I really wish it had been done properly from the start and I don't know what to do now. Does anyone have any guidance on what the best way forward is?
Sorry for the long and slightly disjointed post. There is so much going on I am finding it hard to write it down in a coherent fashion.
TIA

GMS

Your broker is useless.

Which lender was recommended for the new purchase? Most will not do 90% LTV for a second property.

Consent to Let will not be granted on a ;changed our mind' basis. What would the rental income and mortgage payments be per month?

JuniperJane

The second mortgage recommended is with the Coventry building society. Mortgage on our house now is currently £530 which is same as forthcoming rent but would go up to £630 if moved to CIL with the company we have just moved to. There are no agents fees involved. We can cover the shortfall easily enough and have a trusted tenant arranged who is looking to stay at least two years.
I do feel we have been given bad advice but we are so desperate to move that we didn't question it. Even if we don't get the second house we will have to rent as we can't stay where we are.

kingstreet

Why did the mortgage on the current property have to be changed? Why couldn't you have asked the current lender for consent to let and left the mortgage alone?

You may have been able to take a customer retention product at a better rate, then requested consent to let. It would depend on the existing lender. Remortgaging onto another residential product, then requesting consent to let would not be my preferred route.

At 80% you could have gone for a let to buy product and got interest-only to reduce the cost.

As for the mortgage on the second property. Two issues. The first is the deposit. As GMS pointed out, many lenders reduce their maximum loan to 80% or 85% for a mortgage on a second property. The other issue is the cost of the existing mortgage. Many lenders will deduct the cost from affordability so you'd need to be able to pay both mortgages out of income, assuming you had no tenant. Others would ignore a let property/mortgage in the background if it self-financing.

You describe your adviser as an IFA. Do you actually know they are Independent Financial Advisers, or are you using that as a generic? How did you find them?

JuniperJane

Our new remortgage still hasn't been finalised yet, due for completion next week. Could we pull out? Our existing mortgage is with BOI and we have been stung by their interest rate rises. Having now looked into it more myself I think it would have been better to stay with them, as their fixed BTL rate is similar to what we would be moving to via CIL with new company. They also originally valued our house at 25k more than the new company just have.
Our IFA is def an independent and was recommended to us by a work colleague. He said the 2nd mortgage company would assume the first mortgage is self financing. Not only will we be gutted if we don't get it but we will have really messed the vendor about as he has accepted a good offer as he didn't have to market the property.
Thanks for your replies so far.

kingstreet

Why is BoI BTL rate relevant? Is BoI suggesting you should change to such a product?

BoI is one of the easiest lenders to get consent to let on your current mortgage. AFAIK all they ask is payment of a small fee, with no change in the interest rate.

TBH this is a mess, but I don't know enough about the overall case circumstances, to tell you what you should be doing here.

If you have doubts about what you are doing, find another broker near to you and talk to them about it. This forum is useful, but there is no substitute for someone doing a factfind and establishing exactly what you need and the best way to achieve it.

In principle, your options are;-

- ask your current lender for consent to let or
- remortgage current property onto formal buy to let product.

Then;-

- apply for mortgage on second property with lender willing to accept existing property/mortgage in background and only 10% deposit.

JuniperJane

When I called BOI a while ago they said we would have to transfer to their BTL rate.
I will speak to our broker in the morning and go from there.
Thank you again