Mortgage advice please

TeamB

We are looking to remortgage a house we own and rent out, in order to release some equity. Currently our tenant pays the rental management company, who then pay the remainder into the mortgage account. Our current mortgage provider has said this is not acceptable (first time they had told us this of course) and want us to change things around so they can see payments to the mortgage coming directly from our current account, and that they need to see 6 months of such activity before they would consider releasing any more funds to us.

If we apply to a different bank would they say the same thing, or are they more likely to just consider whether we are a safe bet or not in the usual way?

Thanks for any help members can offer.

kingstreet

A BTL lender looking at a remortgage application will want bank statements and/or a copy of the tenancy agreement and it will have its surveyor confirm the rental income when the valuation inspection is done.

It is odd your letting agent paying the mortgage. What happens if they get into financial trouble? Your mortgage could go unpaid for months, ruining your credit history and leaving you close to repossession.

The letting agent should collect the rent, deduct its charges and pay over to you the residue for you to pay what are, after all, your costs.

You or your broker will need to take care in placing this with the right lender.

TeamB

Thanks for your reply. I know it's an unorthodox approach but at the time we thought it just simplified matters, since the rental payment (minus agent fees) pretty much covers the mortgage - all we do is make a very small topup payment by standing order to make sure it's covered.

So basically you're saying that, regardless of whether we remain with our current provider or move lenders, we will need to change the current setup and leave it for a period of months in order to demonstrate that the mortgage does get paid?

Dave_Ham

It is difficult to determine from the facts provided.


I would still imagine there may be a solution now (subject to the absolute details) although they would almost certainly want to see an audit chain of the money filtering through.


Good luck

Foxy-Stoat_3

TeamB wrote: »

the rental payment (minus agent fees) pretty much covers the mortgage - all we do is make a very small topup payment by standing order to make sure it's covered.

This will fail any BTL mortgage you apply for as the rental payments need to be 25% more than the mortgage.

kingstreet

F-S has a point.

Typically, a lender will want to see the rent exceed the monthly mortgage interest, calculated at perhaps 6% per annum, by 25%.

Is it currently a repayment mortgage, or are you struggling to cover interest-only payments from the rent?

As I said, if your broker finds a lender willing to accept the tenancy agreement alone and bank statements aren't needed, you should be fine. As Dave said, the other way is to provide statements from the letting agent showing the money coming in and going out.

However, I would not continue this arrangement for your own peace of mind in the longer term.

TeamB

Thanks for the further comments. The mortgage is repayment, and we can easily afford the repayments currently and on the proposed remortgage amount (we only need just over twice one of our annual salaries and both of us are in fulltime employment). We simply chose to deal with the rent this way as it seemed easiest at the time, however we're getting it changed over now!

We can provide payslips and bank statements to prove income and expenses, and a statement from the letting agent to demonstrate regular income on that front. As far as the rent is concerned, once we part company with the agent (which is happening now) the full rental amount will exceed the quoted mortgage amount per month.

I hope that all makes sense!

Thrugelmir

TeamB wrote: »

Thanks for the further comments. The mortgage is repayment, and we can easily afford the repayments currently and on the proposed remortgage amount (we only need just over twice one of our annual salaries and both of us are in fulltime employment). We simply chose to deal with the rent this way as it seemed easiest at the time, however we're getting it changed over now!

We can provide payslips and bank statements to prove income and expenses, and a statement from the letting agent to demonstrate regular income on that front. As far as the rent is concerned, once we part company with the agent (which is happening now) the full rental amount will exceed the quoted mortgage amount per month.

I hope that all makes sense!

How do you pay/fund the tax that's due then?