Switching current mortgage to buy to let and purchasing an additional property

John59

Hello all,

I hope this is the correct forum area to post... So anyway I am currently living in a property I purchased in 2010 for £100,000. The property has likley risen in value by around 5%. I payed an intial deposit of 30%, i.e. £30,000 in 2010 and so have a mortgage debt of a little under £70,000 more or less.

I am now looking to move in to another larger property as we have had an additional child. The house I would be interested to purchase would cost around £160 - 163,000. I currently earn £33,425 per year with a bonus of around 5%, although this is not written on my contract. In addition we recive around £3000 per year in tax credits. My wife does not currently work. I have been in stable employment for 10 years and as far as I know have never had bad credit.

I have savings of around £15,000 that I would like to use towards a deposit on the new property but would like to switch my current property to a buy to let repayment mortgage, if possible, as I see this as an investment for my children in the long term. I do not believe I would have an issue to rent my current property as I have already had interest.

My question is am I likely to be accepted for a repayment mortgage on the newer property (£163,000) with my current sallery and savings and still keep the current property as an investment and also keep the older property I currently live in?

Also would I be entitled to the new 95% government backed scheme so i would only need 5% of the property value as a deposit? If pushed I would be able to manage to get the 10% deposit.

I was looking for some advise from you guys on this forum with how to best proceed..

Thank you.

ACG

Getting your existing property on a repayment btl mortgage is usually quite difficult - the rental payments usually has to be 125% of the monthly repayments - so its unlikely to fit... although you could put it on interest only and any remaining money put in a savings account or overpay by the maximum amount the deal allows.

As for the new mortgage, assuming you fit lenders affordability (i think its a bit of a stretch) then yes you can do it. I dont think you can use the help to buy scheme as you have to sign something to say you do not own any other properties.

Thrugelmir

John59 wrote: »

My question is am I likely to be accepted for a repayment mortgage on the newer property (£163,000) with my current sallery and savings and still keep the current property as an investment and also keep the older property I currently live in?

Can you afford a BTL repayment mortgage?

The capital element of your repayments would need to come out of after tax income, i.e. rental income less interest less expenses, then profit after tax.

While you are thinking of leaving the property as an investment for your children. What provision are you making for yourself and your wife in retirement? Far more tax effective ways than BTL. Also spreads your risk. As with 2 properties you are very much at the mercy of both property markets and interest rates.

Simon_gloster

How do you get tax credits on that income? It could be used for affordability but will be questioned on it'd sustainability.

As ACG says it'd s stretch and a big stretch on your salary alone, in fact very optimistic. If the BTL doesn't self fund (not in your eyes but the lenders own calculations) then any deficit will be deducted off your income.

Man and non working wife and one child with no debts as eg, absolute max by a mile 4.25 times your income.

John59

Hi again,

Firstly thank you very much for taking the time to read my questions, my current repayment mortgage is just over £400 and I have been to a couple of estate agents who have valued the property rental value at £575 PCM.

I understand of course there is tax to pay on the income and maintenance costs etc. If it would not be possible to keep the current property as a buy to let repayment then I would sell but this would not be my first option as the current property should pay for its self and I would like to leave this for my children once we pass away.

If the maximum that could be borrowed is 4.25X sallary then I would be fine but is that a likely amount that I would be accepted to borrow on given the figures I wrote above?

Thank you

Simon_gloster

Max 4.25 income, realistic 3-3.5 times income.