Including buy-to-let income in mortgage application

james.hope87

Hi all

3 years ago I bought a property for me to live in, and then in august 2013 I moved out and transferred it to a buy to let mortgage.
I now receive regular rental income on the property.

We are now applying for another mortgage to buy a residential property, I applied for an application in principle online and got a figure of 176k.

However I phoned them up today to confirm before putting in an offer and they said that they can only include buy-to-let rental income if I show them 3 years of tax returns. As I have only been renting out the property since august, I have no tax returns because I haven't done my SA tax yet. The guy on the phone was not a mortgage advisor as they are only open during the week, but he seemed pretty definite.

Do all lenders require you to be receiving rental income for 3 years before they can consider it?

Without the rental income we cannot get a reasonable mortgage offer.

kingstreet

Realistically, the best you can expect is that a lender will ignore both the income and the mortgage on the let property.

You won't get one without the other. They may take into account the income, but will take off you the mortgage payment so it balances out.

Speak to a broker. Going to the wrong lender with this will not get you the desired outcome.

james.hope87

Thanks for the info:

Well, yeah I would not expect them to take the income into account without the mortgage.

But it seems that HSBC will take the mortgage into account but not the income without me having let it for 3 years.

I have spoken to a broker, but they did not ask me how long I had been letting it and it seems to make more sense to go to the lenders directly.

Is it really possible to find mortgages that will ignore the load and the income? If so then we can get a great mortgage.

kingstreet

Yes, we do a lot of cases where the client is retaining an existing property and letting it and we look for a new lender which will ignore the existing property/mortgage in the background.

Some ask for as little as a letter from a letting agent confirming what the rental income will be, through to lenders requiring three months' bank statements to evidence receipt of rent.

As usual HSBC is not on the same planet, as yours is not the kind of business it is trying to attract.

It only makes sense to go direct to a lender if you find out which lender(s) are likely to look more favourably on what you are trying to do. Your experience in attempting this with HSBC should lead you to conclude you need a broker.

james.hope87

It only makes sense to go direct to a lender if you find out which lender(s) are likely to look more favourably on what you are trying to do. Your experience in attempting this with HSBC should lead you to conclude you need a broker.

Little bit blunt, but fair enough!

All is not lost then? We saw a property this afternoon that we both really liked. Then I thought I would check with HSBC before putting an offer in (good thing I did!)

I already spoke to L&C Mortgages a week or so ago and got a decision in principle for 175-215k. I'll give them a ring again tomorrow morning again I guess to clarify that point and then hopefully I can still put in an offer on time!

I am actually planning on selling the property I have as buy-to-let but the timing is all wrong as there is still 6 months left on the tenants' contract. We are having to move as the landlord of our rented property is selling. Would it be worth mentioning that I am planning to sell?

ACG

Its unlikely to make any difference unless it was up for sale and under offer.

As kignstreet says, you should be able to get a lender who will ignore it - therefore it should not make any difference whether it is sold/up for sale/or remains let out.

GMS

What percentage deposit do you have for the new purchase?

james.hope87

Hopefully we'll have about 20%.
Easy to do if we get the price we are hoping to get! We are trying to keep 4-5k aside for legal fees and stamp duty etc.

On a related note, the guide on mse seems to suggest you find a solicitor after having an offer accepted. I have just had a sudden feeling that we should already have one lined up though.

ACG

It makes no harm in having one at the ready.

Just ensure that:
1) They do not start anything chargeable until you have a mortgage offer,
2) They are able to act for your lender of choice (they are on the lenders panel of approved solicitors).

james.hope87

Well we haven't decided on a mortgage yet so we don't know who our lender will be.

I know a solicitor that my dad plays croquet with and he oversaw the purchase of my last property. So I can give him a ring on Monday and ensure that is all possible before confirming the offer?

We are looking to buy in Bristol and it is so competitive, I don't want to miss the window! 3 others viewed the property on the same day as us.

Thrugelmir

james.hope87 wrote: »

Would it be worth mentioning that I am planning to sell?

Planning to and actually completing a sale are totally different matters. To sell you need to be able to give vacant possession. So the property may not be generating any income for a period of time.