2nd mortgage + room rent

HardSpend

Hi I have a few questions for the board so will try explain circumstances first.

I have an existing mortgage of £5.7k on a small flat which I am paying off at £130 per month.

Solely based on my salary and nothing else and according to the L&C website calculator I can afford a mortgage of up to £200k.

I would like to buy a new home whilst holding on to my existing flat in case I move back in a few years time.

I am wondering how can I get a larger mortgage (i.e. more than £200k).:think:

I would like to buy a home where I can rent out one or possibly two rooms. Would the rent I get be considered as part of my salary and therefore increase the amount of mortgage I can get?

I can rent out my existing flat as well and that would boost my 'salary' too? My current mortgage is not buy to let so I think i might need to get it changed so I am classed as a landlord - or perhaps it would be easier if I just paid it off but then I would have less deposit for new home!

If the room rent and rent of existing flat does count as extra income do you think I can still get the same 'regular deals' advertised e.g. by Nationwide 3% fixed for 10 years at 70% max LTV. Or would I need to get some sort of different type of mortgage since I am renting rooms?

The reason I think the rental income might not count as extra income is because I could lie to the lender and say I am going to rent rooms and rent my flat and then don't. Or I could fail to find someone to rent flat or rooms.
Perhaps I would need to prove it somehow by getting a contract in place with prospective tenants? I can easily do this as I would be renting flat to my best friend and would rent room to my other friend who I also work with so they would help me out by signing contracts but not sure if this sort of thing is required by lender.

It would be a sole mortgage. I have a partner in full time employment but I do not want her income to be considered. She does not live with me. Longer term we will get our own place but for now I don't think it's relevant?

Thanks for reading

nidO

HardSpend wrote: »

Would the rent I get be considered as part of my salary and therefore increase the amount of mortgage I can get?

No, money made from lodgers, whether existing or potential, will not be counted as income by mortgage lenders.

HardSpend wrote: »

I can rent out my existing flat as well and that would boost my 'salary' too? My current mortgage is not buy to let so I think i might need to get it changed so I am classed as a landlord - or perhaps it would be easier if I just paid it off but then I would have less deposit for new home!

Yes, any income you have from your flat over and above your mortgage commitments can be classed as income. You mustn't tell them that this is part of your salary though, it needs to be listed as separate income and with your mortgage commitment on the flat also declared.
Your problem is just that as you're moving from the flat, at the point you apply for a mortgage on the house, you'll have no income from the flat as you'll still be living there, and lenders will want actual income, not income you might maybe have in the future.

HardSpend wrote: »

The reason I think the rental income might not count as extra income is because I could lie to the lender and say I am going to rent rooms and rent my flat and then don't. Or I could fail to find someone to rent flat or rooms.

Bingo.

HardSpend wrote: »

Perhaps I would need to prove it somehow by getting a contract in place with prospective tenants? I can easily do this as I would be renting flat to my best friend

If you can get a signed tenancy agreement on your flat before applying for a mortgage on the new house, lenders might maybe consider it, that's probably a question to ask a broker.

HardSpend

Thanks. Just noticed Nationwide has a pretty good calculator that asks questions about existing mortgages and rental incomes.

pjread

For the sake of 5k I'd clear the current mortgage, as I suspect that'd make things a bit simpler (happy to be corrected though!)

kingstreet

HardSpend wrote: »

Thanks. Just noticed Nationwide has a pretty good calculator that asks questions about existing mortgages and rental incomes.

Yes and Nationwide limits LTV for a second property to 85% and will only ignore the let property in the background if you are already receiving the rent.

Otherwise it deducts the balance of the mortgage from your borrowing power. Others will deduct the monthly payment from your income, which has a lesser impact.

Speak to an independent broker about the best way to construct this and with which lender(s).