want to buy a second property - mortgage advice

ttaylor

I currently have one property with a standard mortgage of £85k. Due to the lease term remaining, it's current value is £140k. Full market value would be £160k.

I want to buy another property to live in and rent out my current property. I can move my existing mortgage to a new property and apply for a buy to let on the existing place. My income allows me to borrow £110k for the residential mortgage.

A couple of questions:

-Can I quote full market value when apply for the BTL loan? It could be the difference between borrowing £105k or £120k, based on a 25% deposit.

-Due to the lease affecting the property value, should I insist on a repayment buy to let mortgage? I do plan to extend the lease once I save up for it, but right now I want to get the 2nd property.

kingstreet

ttaylor wrote: »

Can I quote full market value when apply for the BTL loan? It could be the difference between borrowing £105k or £120k, based on a 25% deposit

You can quote what you like. The surveyor employed by the lender will decide on the value and the rental income. The remaining term on the lease will determine which lenders will lend and which should be avoided;-

http://www.cml.org.uk/cml/handbook/englandandwales/question-list/321

Due to the lease affecting the property value, should I insist on a repayment buy to let mortgage? I do plan to extend the lease once I save up for it, but right now I want to get the 2nd property.

Take a repayment mortgage if you want to build more equity in the property. The lease issue should not impact on that. Remember that capital repayments are not allowable as an expense against the rental income for tax purposes.

You'll be able to remortgage onto a LTB product upto 75% of the value of the property, or the amount covered by rental income = 125% of monthly mortgage interest at 6%pa, whichever is lower.

Be careful to ensure your current lender allows you to port your current rate when remortgaging. Many only allow it on a sale and purchase.

Make sure your lender is happy to ignore the let property/mortgage in the background and with the loan to value of the new purchase. For example, Nationwide will only lend on a second property when you can provide a copy of the AST and a bank statement showing receipt of the rent and to a maximum of 85%.