Obtaining a second mortgage on a new property whilst retaining my current property

Excitingtimes

Hi

I currently have a sole mortgage on the property I live in - with an equity of around 35%.

I would like to look a retaining this property as mine, but let it out, whilst purchasing another property (and mortgage) with my partner in joint names - is this possible? My partner does not have any other property. How does it work? What do I need to be aware of?

Thanks!!

kingstreet

You need to obtain consent to let from your current lender and consent to sublet if the property is leasehold.

Some lenders will require you to have a bigger deposit than usual for a second property, perhaps 15% or 20% and you should look for a lender which will ignore the let property/mortgage in the background and not "tax" your income with the mortgage payments, as that may affect your borrowing power for the new purchase.

A whole market broker may be your best bet to put this together for you effectively.

holly_hobby

Yes this is possible.

If you don't need to release any equity out of your current home, you apply to your present lender for consent to let (typically time bound at circa 3 yrs, there will be a fee to pay and you will generally find they will put a loading on variable rate, if you aren't on a product).

For this to be excluded from the affordability assessment on your next mortgage (which several lenders, but no all, will permit), the rented unit under CTL must be self sufficient - ie rent covering mge payments (125% is a typical yardstick they will use), typically 15% min deposit.

If so, this commitment will be set aside when calculating your max borrowing power with your new lender.

If CTL is refused or you need to release equity, you will need to remortgage onto a dedicated BTL mortgage arrangement .

The above are the very bare bones of the process, and in both cases I would strongly suggest you engage a whole of market mortgage adviser, whom should be aware of those lenders that will proceed on this basis or whom is the most suitable BTL provider for your needs (BTL will be assessed at rental income of 125% on mge interest, max rate curretly used is 6%, but several lenders are using a lower payrate for assessment).

That being said, please do your homework regarging letting and becoming a landlord, its not an easy game, can be fraut with issues ..

monetary - emergency funds, HMRC returns, management fees & insurances, servicing the mortgage when there are no rental reciepts, etc

regulatory - fire, utility checks/service etc, deposit protection, AST, etc

personal - nightmare tenants, trashed property, unpaid rent, no rental demand falling market values, etc ....

and as you can see v quickly become a heartache for all ...... however if done correctly and with due diligence before hand, it can be a rewarding career ...... trick is go into it with your eyes wide open !!

Hope this helps

Holly