Buy to Let/ Company Director

Hi Guys and Girls,

In anticipation, thanks for any help.

I am a bit stuck for information at the moment.

Long and short of situation is that we(wife and I) want to convert current mortgage to buy to let, take out some equity and use that as deposit on another house. I am not sure of the % i need to have/leave in buy to let etc. Also some questions regarding my salary etc.

More details:

My situation: I own 50% shares in a company that *touch wood* are doing well. Our retained profits are £500k after 3 yrs trading with profits AFTER paying our monthly dividends of £4k to each partner each month being £29k monthly .

In total, I paid myself £62k in div's + £8k salary = £70k in the last year. The previous year, we were on PAYE for 60k/yr.

My wife has her own limited company and paid herself about £50k 2 years ago. The last year, she paid herself less as she was on maternity leave but she's back at work and monthly profit(s) at her company is £7.5k - she's taking home about 5k a month.

Our current house:

Valued by estate agent this week at £370k. Mortgage left on it = £212k . Lets assume rental income would be 125%+ of mortgage repayment.

New house that we want to buy: £570k
We've got a further 30-40k saved up to add to any equity for a deposit.

Taking all of this into account:

1) How much equity would we be able to take out of the property when going to BTL? I ASSUME you need to leave 20% in there ?

2) How quick does remortgaging take from normal to BTL?

3)Who's good lenders to Company Directors. Does any of them take into account retained profits ?

4) Taking into account some of the issues around lending to self-employed/co directors - if i wanted to do this in 3-6 months, would it be easier to go PAYE for both of us via our companies as 'better' proof to lenders?

5) Is there currently a multiplier that lenders use to give me an idea as to lending sum? I saw 3.25x combined gross somewhere ?

Many Thanks and any tips more than welcome!!!

Replies

  • amnblogamnblog Forumite
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    Lenders will consider profit rather than drawings if you control distribution of that profit, which as a 50% shareholder you do not.

    This makes everything very tight on affordability and your need to engage a broker to establish what can be done.

    Multiples don't mean too much anymore as it is all about affordability - for a rough guide probably 4 to 4.5 income top end.

    Changing the way you are paid will not help. I always tell borrowers not to make decisions about their business if the only reason is because they think it may help with a mortgage application.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • ThrugelmirThrugelmir Forumite
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    aCilnv wrote: »
    Valued by estate agent this week at £370k. Mortgage left on it = £212k . Lets assume rental income would be 125%+ of mortgage repayment.

    Better to obtain some real facts and figures than make assumptions. Lenders will base the calculation on a 5% - 7% interest rate. Not your current residential mortgage interest rate. On a £296k mortgage you'll be looking at rental income per month of somewhere in the region of £1540 to £2,150 depending on the lender.
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