Rental Income

yorkgate

Does anyone here know what the Halifax criteria is concerning rental income when applying for a mortgage. If your last 3 SA302's show a track record of taxable rental income is this not acceptable to them?

Dave_Ham

It is going to depend upon the detail of the case and how the case is packaged.

The fact you have the SA302 certainly makes a big difference.

If you are doing this in branch or on the phone direct, would not be as confident on the outcome.

Thrugelmir

Is the let property mortgage free?

yorkgate

Properties concerned are practically mortgage free - about 7k between 2 Btl's. Thing is the Halifax site is a bit ambivalent about this. Most companies seem to make an allowance for small mortgages outstanding - the mortage payments are off set against earnings. Halifax criteria just asks for whether the property is unencumbered or not - so mine, I take it, would still be classed as encumbered. They seem only willing to offset rental profit against mortgage and other expenses, but not for affordability. I kept a small mortgage balance outstanding on the properties because I reckoned it more useful to keep the BTL mortgages open if ever I needed to raise capitol against them, now maybe it could be working against me. I haven't spoken directly to the Halifax yet, I'm only going by their site. I do have past SA302's stating the rental income profit and am wondering if the criteria on their site is for people who haven't got the income on their SA302's. Would appreciate advice from anyone with the relevant experience.
Many thanks.

kingstreet

If this was a broker case, the broker would;-

- enter the gross rental income in the additional income section

- enter the current BTL mortgage in the commitments section

and provide no more than three months bank statements and possibly the current AST to evidence the income.

See E & F on page six here;-

http://www.halifax-intermediaries.co.uk/pdf/Hints-and-Tips-Post-MMR-Guide-for-Keying-Main-Applications.pdf

kingstreet

Rental income criteria;-

Rental Income (If the property is already let)

3 months consecutive bank statements, Tenancy Agreement (current) Letter from Letting Agent OR Letter from accountant or solicitor.

Must show;-

customer full name or initial & surname, account number, receipt of rental income, bank heading/name & http address for internet statement must show applicants name, rental period & rental payment must be on company headed paper, addressed to applicant & confirm property address, rental payment & that the property is currently rented.

Dave_Ham

kingstreet wrote: »

Rental income criteria;-

Issue here is that rental income will not drag through to affect affordability, which is what I think the OP is after.

May mitigate the commitment if it absolutely matches..

kingstreet

Suggest OP puts data in boxes here and finds out;-

http://www.halifax-intermediaries.co.uk/tools_and_calculators/mortgage_affordability_calculator/default.aspx

In other income, enter gross annual rent using "Rental Income from this property if CTL" (I know what was said earlier, this is ok for the calculator)

and enter monthly mortgage payment in "monthly mortgage commitments" section of client's expenditure.

As an example, someone earning £30k a year can borrow £150k over 25years with no dependents, credit etc.

If you then add £9,600 a year rental income and a £250 a month mortgage commitment, this remains at £150,000 as it considers the let property self-financing.

FWIW the loan to income cap prevents borrowing more than £150k as even if there is no mortgage and the property is unencumbered, the maximum loan remains at £150k.

I suspect the answer the OP is looking for, is it makes no difference to what you can borrow whether there's a mortgage or not?

yorkgate

Thanks for all the answers. It is the Halifax intermediaries site that I have been checking. Thing is even if you still input the gross rental income it doesn't really effect anything because with their affordability calculator rental income can only be used to offset mortgage and other expenses. My mortgage commitments on the 2 BTLs amounts to £50 monthly. I have no other expenses apart from the relevant rates for the houses. So the rental income works in favour of people with bigger commitments - but not for me. Strange, I know.

The other point is that I have noticed in another Halifax intermed memo that is seems OK to enter net rental income - after all expenses - into the income section, provided the property is unencumbered. This is the confusing part, unlike other companies Halifax don't seem to take into account to what degree the actual property is encumbered - their affordability calculator bears this out - so in my case I would be a much better proposition for them if I clear the balances with the BTLs.

As I've already said, I also wonder if all the above is relevant if you can actually demonstrate a record of steady rental income with the SA302s, ie do Halifax then not bother breaking down the income if SA302s are available.

Thanks for your time everybody. Appreciate the advice.

GMS

I had a case recently with SA302's for rental income. I was told to input this as the income without adding a mortgage commitment as the SA302 wouldbe profit only so takes into account the mortgage as a deduction prior to arriving at the profit figure.

I also found that adding Mr and Mrs rental income reduded the loan available!

Dave_Ham

Firstly I am unsure why you have to use Halifax, although sure there must be a reason..

Secondly, you need a broker if this is tight and you need to use this income.

I personally am not going to lay out on a public forum where, how and who to present this to but it can be done and probably through Halifax if presented correctly

The answer to your question and to many threads on here is genuinely to engage a decent mortgage broker..

All the best