How do lender takes into account BTL mortgage when applying for residential mortgage?

horngkai

I am thinking of moving house at some point. The idea is to change my current house to a BTL mortgage and get another residential mortgage on the new place I will be moving to. My question will be that since it will be a new BTL mortgage, I suppose they will take into account of this when applying for a residential mortgage. How do they normally consider this? An additional 'loan' payment (I will be getting interest only for BTL)? Or is it counted towards the total mortgage I can afford?

holly_hobby

Several lenders will completely disregard the BTL mge commitment from your own residential mge assessment, IF the property is self sufficient (of which they may require sight of an AST, sight/confirmation that rental income covers the mge, and that the property is let with the lenders consent).

This is an easy placement for an experienced broker, whom will also help in sourcing your BTL remortgage product (rental income 125% of mge interest, 75% ltv for first time landlord, with some lenders also requiring a min earned income of 25k).

Anyhoo your broker will take you through the requirements for both.

Hope this helps

Holly

horngkai

Will they completely disregard the BTL mortgage even if its new? ie I haven't actually rent the place out yet? For those lender who take BTL into account, how do they assess the mortgage? Thanks.

holly_hobby

As I say the BTL commitment will be ignored by several lenders, IF the property is self sufficient ie there is a tenant either in place, or scheduled to commence their tenancy by completion of your resi mge application.

Self sufficiency is generally assessed by the rental income being at least 125% of the mge interest - several BTL lenders also require the applicant to have a min earned income of 25k.

You may also want to consider if your income and capital, can cover both mges, for times of unoccupany (and emergency repairs) re your let property - if the figs are tight, then you may want to reconsider letting at all and sell instead.

Hope this helps

Holly x

MajorTom_2

Potentially yes, my other half owns another house and when we applied for a mortgage on the house we live in now, her other one wasn't rented out at the time. The lender on our house just needed a letter from the letting agency to state what the rental income would be for the other property.
Not all lenders are equal though this is just my experience with NatWest.

MT

horngkai

Thanks for the reply.

What about a consent to let on the current mortgage? Will that affect the new residential mortgage? The main reason to let out the current property is to make moving easier and give me more time to see if the market will improve and to not rush into selling the property just because I want to move.

holly_hobby

Yep, that will work just as well.

Consent to let - clue's in the title ... you will require the lenders consent for you to let this to a 3rd party.

The consent is usually time bound for a circa 3 yr period, usually renewable annually. (this can differ between lenders). After the end period (and if you still intend to let), you will stay on SVR & apx 1.5% loading, switch to a BTL with the them, or remortgage to an alternative BTL provider.

Your current lender may charge an admin fee on your CTL application, but may leave you on your current product without change, but in reality are more likely to add a loading given that this is essentially now a semi-commercial arrangement.

You'll need to obtain landlords buildings insurance (as your residential B&C will be invalidated for commercial let).

Rental income obv needs to be reported by annual SA (or by HMRC PAYE adjustment, in the unlikely event that annual rent receipts are less than £2400 pa)

Anyhoo, there's the very bare bones for you ... anything more just pop back.

Hope this helps


Holly