Would like advice on few mortgage related issues please.

eldaniel

Hi,
I am considering few options at the moment. I have got not so long to pay off remaining mortgage on our flat.
Our combined salary is 25000 without overtime. Eventually we would like to buy a house and rent out the flat. The problem is that in our area 3 bed house cost approx. £150000. I would like to do it as soon as possible, so for the example we have to consider that I won't have more than £10000 deposit when I am ready to make a move.
My questions are:
1. how much mortgage roughly I could get with current income? One online calculator showed max. 90000. Do you recon there could be some substantial exceptions from 4x combined income unwritten rule?
2. If we won't get required £140000 mortgage in an usual way, is there any chance to put my flat (assuming it will be fully repaid and owned) as a guarantee to the bank to get sum required? What is this type of lending called?
3. What is the way to keep my current mortgage on a new property? It is portable, but how does it work, because when I repay it fully mortgage cease to exist as far as I am aware. So could I tell the bank that I would like to port my mortgage onto the new property and then while porting to tell them that any outstanding balance on flat would be paid as a one off payment to them? What is the actual porting process if you are not changing the house, but acquiring additional one.
4. Assuming that I paid off my mortgage completely. What type of the mortgage I would be taking out for my new house which will be our place to live (flat will be to rent out). Would that be standard residential mortgage? Hopefully not buy to let...

Many thanks for your help.

fiesta04

I would suggest that you see an Independent Broker.

F4

eldaniel

I tought I would be able to get some tips here to arm myself with some knowledge before visiting mortgage advisor. However thank you anyway.

Yorkie1

eldaniel wrote: »

Hi,
I am considering few options at the moment. I have got not so long to pay off remaining mortgage on our flat.
Our combined salary is 25000 without overtime. Eventually we would like to buy a house and rent out the flat. The problem is that in our area 3 bed house cost approx. £150000. I would like to do it as soon as possible, so for the example we have to consider that I won't have more than £10000 deposit when I am ready to make a move.
My questions are:
1. how much mortgage roughly I could get with current income? One online calculator showed max. 90000. Do you recon there could be some substantial exceptions from 4x combined income unwritten rule?

If you only have £10K deposit then you are looking for a 95% mortgage (rare) at 5.6 times multiple. I think you are highly unlikely to get this.

Do you also have £3-5K for fees, surveys, searches, etc?

2. If we won't get required £140000 mortgage in an usual way, is there any chance to put my flat (assuming it will be fully repaid and owned) as a guarantee to the bank to get sum required? What is this type of lending called?

I don't know. How much mortgage is left on your flat and what is is worth?

3. What is the way to keep my current mortgage on a new property? It is portable, but how does it work, because when I repay it fully mortgage cease to exist as far as I am aware. So could I tell the bank that I would like to port my mortgage onto the new property and then while porting to tell them that any outstanding balance on flat would be paid as a one off payment to them? What is the actual porting process if you are not changing the house, but acquiring additional one.

I think that an application to port a mortgage requires the original property to be sold at the same time. Even if you can port in your situation, I think that you can only port what is outstanding on the mortgage at the time of doing so, and any additional lending on the new property is at current rates from the same lender.

Are you aware that there is no automatic right to port a mortgage product anyway? You need to meet the current lending criteria for a new mortgage - if you meet these, then the existing mortgage interest rate is ported over.

4. Assuming that I paid off my mortgage completely. What type of the mortgage I would be taking out for my new house which will be our place to live (flat will be to rent out). Would that be standard residential mortgage? Hopefully not buy to let...

Not sure.

Many thanks for your help.

As above. I agree that you might find the input of a broker useful.

Annisele

eldaniel wrote: »

1. how much mortgage roughly I could get with current income? One online calculator showed max. 90000. Do you recon there could be some substantial exceptions from 4x combined income unwritten rule?

You're looking to borrow £140k when an online calculate is saying £90k. That's quite a stretch upwards - and as others have said, your deposit will be on the low side.

2. If we won't get required £140000 mortgage in an usual way, is there any chance to put my flat (assuming it will be fully repaid and owned) as a guarantee to the bank to get sum required? What is this type of lending called?

In theory you could remortgage your flat, and then use that money towards the purchase of your house. However, it sounds as though you're *very* tight on affordability - and it might be better to sell the flat in order to buy the house.

3. What is the way to keep my current mortgage on a new property? It is portable, but how does it work, because when I repay it fully mortgage cease to exist as far as I am aware. So could I tell the bank that I would like to port my mortgage onto the new property and then while porting to tell them that any outstanding balance on flat would be paid as a one off payment to them? What is the actual porting process if you are not changing the house, but acquiring additional one.

You'd only be able to port the outstanding balance - which is likely nowhere near enough to buy a house. Plus, you could only port the rate to a new property if you paid off the first loan - and where will the money come from to do that?

4. Assuming that I paid off my mortgage completely. What type of the mortgage I would be taking out for my new house which will be our place to live (flat will be to rent out). Would that be standard residential mortgage? Hopefully not buy to let...

If you'll be living in the house, then you'll want a normal residential mortgage on the house.

eldaniel

Thanks a lot for your help. That just confirmed my feelings that it is probably way too early to think about it I guess.
I did not consider selling a flat even if it will be fully repaid because I paid for it 135k and now they are going for 115k so I think ideal solution is to keep it to rent it out when I finally can afford a house - especially considering all the cost associated with selling (solicitors etc).
I guess I will have to wait until I repay my current mortgage to the end. Then I will be able to put aside much more money every month to save decent deposit.
I just thought that, if everything else will fail, as a last resort I would be able to secure my new house/mortgage with my flat when it will be fully repaid. In other words that my flat could serve kind of like an assurance to enable me to get higher mortgage, because then risk for the bank would be minimal when they can repossess my current home if I fail to pay the mortgage on new house.
I am not familiar with UK reality in these types of mortgages. I know back in my home country Poland) people used to secure the mortgages with the properties of relatives (usually parents) which were fully repaid.

Many thanks

Thrugelmir

Personally I would sell the flat and inject the equity into the new property. The benefit of doing so is a lower rate of interest on the new mortgage.

kingstreet

Sell the flat, or if you are really determined to have the aggro of being a landlord, remortgage the flat onto a Let To Buy product. You'll be able to get 75% of the value of the property, subject to the rental income being at least 125% of the monthly mortgage interest assuming perhaps 6% per annum.

Use the remortgage money to repay the existing mortgage and the balance to fund the deposit for the new purchase.

Take a residential mortgage for the residual amount you need to purchase the property and your £10k will just about cover the buying, selling and remortgage fees.

As was suggested earlier, this would best be discussed with a whole market broker to piece together the most appropriate route for you.

You mention porting. This is only the transfer of the rate from the old mortgage to a new one. How good is your existing rate and how much is left outstanding? Because that's all you'll be able to get on the new mortgage at the old rate. Any increased borrowing will be given on one of the lender's current products.

kingstreet

eldaniel wrote: »

I just thought that, if everything else will fail, as a last resort I would be able to secure my new house/mortgage with my flat when it will be fully repaid

No. Cross charging facilities have largely disappeared in the last five years, although they are coming back with utilisation in "helping hand" family-support schemes where a relative's property is also used as security for a FTB mortgage/purchase.

eldaniel

kingstreet wrote: »

You mention porting. This is only the transfer of the rate from the old mortgage to a new one. How good is your existing rate and how much is left outstanding? Because that's all you'll be able to get on the new mortgage at the old rate. Any increased borrowing will be given on one of the lender's current products.

I think I have got brilliant product. Offset tracker for life at +2.09 above interest rate.

Many thanks for rest of advice. I see I will have to seriously consider option of selling the flat to move up the ladder.

kingstreet

How much is left owing?

Can you "redraw" to maximise the amount you can "port?"

Will your lender allow a port where the existing property is not being sold? Some do. Many/most don't.

2.59% is good, but there are better rates available, particularly as you may have a sub 60% LTV with the LTB remortgage route I mentioned.