Does having a BTL mortgage affect how much I can borrow for a new mortgage?

uptomyeyeballs

I currently have a mortgage balance on a house of about £56k. The house is worth about £60k. I intend renting it out, so will be looking at a £45k buy to let, interest only mortgage. After I rent out, i'll move in with my girlfriend temporarily. She has her own property, but we want to buy a new one. She'll then rent hers out as well.

My question is, once i've rented out the one I own, does having the £45k BTL mortgage affect how much I can borrow for a new mortgage? I'm probably looking at borrowing around £100k. My salary is around £38k per annum.

uptomyeyeballs

My payments on the BTL will be around £150pcm and I should receive around £360pcm minus management fees, so about £150pcm nett income from it.

kingstreet

At the moment, you're probably better off looking for a lender which ignores a let property/mortgage in the background.

However, after April 26 you may find lenders want to assume you'll have no tenant and have to pay both mortgages and will therefore "tax" you the cost of the mortgage on the let property.

uptomyeyeballs

kingstreet wrote: »

At the moment, you're probably better off looking for a lender which ignores a let property/mortgage in the background.

However, after April 26 you may find lenders want to assume you'll have no tenant and have to pay both mortgages and will therefore "tax" you the cost of the mortgage on the let property.

How will that work then? I won't actually be in a financial position to convert my mortgage into a buy to let one until April 25th, so this is definitely going to affect us.

Thanks in anticipation.

kingstreet

Lenders will either;-

deduct the outstanding mortgage amount from your borrowing power

or

deduct the monthly cost of the mortgage in the affordability calculator as it would any other credit commitment

if they don't ignore the property/mortgage as self-financing as they do now.

It's difficult to know what will happen with such issues yet.

uptomyeyeballs

Thank you kingstreet. This might mean I sell my house instead of renting it out. My girlfriend has her own house/mortgage at the moment, but has only been self employed for 9 months so we can't really use her income against a new purchase anyway. Oh well .......

kingstreet

There are lenders who will accept someone with one year's accounts/SA302, so my advice is to speak to a whole market broker.

You may get an idea of what you can do and when, even if there's nothing you can do now.

uptomyeyeballs

We've taken the option to get 'consent to let' from my lender, which allows us to use the £14k it would have cost us to convert to BTL as an enhanced deposit on the new property we hope to buy. In 12 months time, if they insist we move the rental to BTL we'll have the money for that by then too. Happy days.