Has MMR dashed all hope of 2nd home purchase?

KCurly

Hi Folks

I have never posted on a forum before but could really use some advice.

I am returning to full-time study this September and my hubby and I were hoping to purchase a flat (second home) near the uni (150+ miles away) for me to live in during the week. We contacted our financial advisor at the beginning of the year who said it shouldn’t be a problem. He advised us to draw down £60k for a deposit from our investment property, converting that mortgage from a repayment to an interest only BTL and said we should be able to get a mortgage for £130k for a new place. He calculated that the repayments would practically be covered by the rent from our investment property, so sent us on our way to find a flat.

We found a couple of places and put in offers but they were rejected. We finally found a beautiful flat on 26th April and put in an offer which was accepted, only to be told by our advisor that the mortgage products that were available to us at the beginning of the year were no longer obtainable due to the implementation of the MMR rules. We provided him with additional information and he made further enquiries and came back to us late yesterday saying the best offer he received was from Santander of £34K!!We are in complete shock! If we had known that the MMR would so adversely affect our application (our advisor hadn’t warned us either) we would have probably offered close to the asking price on the flats we let go.

Is that it, then? Under the new rules, can we not get a residential mortgage from anyone for a second home, even though we have a good credit rating, no debts, a deposit of £60k and equity in our current properties totalling in excess of £200k? Our advisor says we could get a BTL mortgage but as I intend to live there, this wouldn’t be allowed. Is it worth changing advisors – would another FA have access to different products? Whilst I don’t particularly like the idea of renting (it’s a 5-year course), should I do this for a while and give the MMR rules time to settle and, hopefully, relax?

I should add that my husband is the sole earner at the moment and we have 3 dependants, although the eldest hopes to attend uni in September 2015.

Thank you in advance for your help.

Thrugelmir

Irrespective of MMR. Two issues stand out, firstly the withdraw of equity to provide the deposit and secondly the rental income funding the mortgage.

Sounds as if you would be over leveraged as a result of your plans. A combination of non paying tenants and higher interest rates would certainly be an issue.

KCurly

Thanks for your reply, Thrugelmir. When you put it like that, I can see why lenders may be cautious or reluctant, but this wasn't the impression given by our advisor. I just wish we had known before investing so much time and emotion in searching for a flat...


Thanks again.