Buy to Let Income under 25K

Rowie100

Hi,

Hoping someone in the know could help me and my mum on this one. My mum is looking to get a Buy to Let mortgage on a £370K house. She had the 25% deposit. She ownes her own house outright (worth around £350K) Problem being she only earns £14K p/a. Do you think she could get a BTL mortgage with under 25K salary?

ACG

Theoretically the income is not an issue there are lenders who will look beyond it.

A slightly bigger issue will be why she wants a £370k property on a BTL and how she would afford it if it was empty.

£370k on a BTL when her residential property is worth less will raise some questions.

Rowie100

Thanks so much for replying... I may have down played her property value, it could be around 400K. The property is in Surrey with extreemly high rental prices the house would bring in 1500K p/m, and with property prices increasing atm it is a great investment for her? any thoughts

ACG

Speak to a broker.
This will need to be run by the underwriter.

andyfromotley

Yes with property prices increasing and tenants covering her mortgage its a brilliant investment.

Trouble is, nobody can tell you whether or not in 6 months time property prices may be falling and the house may be empty.

That in a nutshell is the gamble of BTL. And make no mistake, thats what it is a gamble.

dimbo61

Now if MUM has the £92500 deposit Plus say 2% arrangement fee of £5,550 to borrow £277,500 on a BTL property she would be paying around £925 ( Interest only) a month at 4% with her 25% deposit.
With letting agents fees and other costs she might make £300/400 a month.
Huge Gamble

Thrugelmir

Rowie100 wrote: »

Thanks so much for replying... I may have down played her property value, it could be around 400K. The property is in Surrey with extreemly high rental prices the house would bring in 1500K p/m, and with property prices increasing atm it is a great investment for her? any thoughts

If it all goes wrong then her home is at risk. First rule of investing only risk what you can afford to lose. Leveraging is often where people get it wrong by only looking at the upside overly optimistically.

jayson043

Does your mum have any experience in letting property? Residential or commerical. It's a lot of money to risk.

getmore4less

Rowie100 wrote: »

Thanks so much for replying... I may have down played her property value, it could be around 400K. The property is in Surrey with extreemly high rental prices the house would bring in 1500K p/m, and with property prices increasing atm it is a great investment for her? any thoughts

Assuming you mean £1500pm gross yield of 4.8% not that good.

nuzik

Its a high LTV to be buying the first BTL. Income is good but the mortgage is so high. Im with getmore4less it doesnt look that good. If its left empty and the economy goes tits up can she afford that mortgage? If its on i/o and she hasn't paid any off and she doesn't have a suitable vehicle in place at the end of the term what will she do?

Leon_W

Someone mentioned it earlier. If it's a BTL then why would somebody want such a poor return ? This is the sort of question any underwriter would be asking as it doesn't make much sense.


Returns would be greatly improved by buying say three smaller cheaper properties rather than one dirty great expensive one.