Buy to let Mortage screw up

Crackingbones

I am buying a property to rent out. my offer has been accepted but when I spoke to my Mortage broker he said because of new rules that have come into place houses with lower yields require larger deposit inpaticular in London. I had assumed that I would need 25% deposit but it seems I would need 40%. I Was thinking of asking the estate agent to get a discount 5k from a £408k price but I am guessing the seller wouldn't be interested in my situation. I don't want to annoy them or make it look as if I am planning games. Any ideas. The house is good but I am not in love with it but it's the first offer I have had accepted after months of trying.

Cornucopia

The difference between 25% deposit and 40% deposit on a £408k purchase is £61k. Unless you have this amount or close to it, plus your original £102k, I think you may have to change your plans.

Your broker should be able to advise you whether you have any prospect of getting a mortgage from any other lender.

Personally, assuming that maybe you have £125k available for deposit, I would be looking just outside of London, where yields are much better (but the prospect for capital growth might be reduced). I'd be aiming for 60% LTV.

marksoton

Crackingbones wrote: »

I am buying a property to rent out. my offer has been accepted but when I spoke to my Mortage broker he said because of new rules that have come into place houses with lower yields require larger deposit inpaticular in London. I had assumed that I would need 25% deposit but it seems I would need 40%. I Was thinking of asking the estate agent to get a discount 5k from a £408k price but I am guessing the seller wouldn't be interested in my situation. I don't want to annoy them or make it look as if I am planning games. Any ideas. The house is good but I am not in love with it but it's the first offer I have had accepted after months of trying.

I bloody give up.....

dimbo61

Sorry but you need to do your homework !
With the changes in BTL tax relief over the next 3 years and extra stamp duty of 3 per cent I hope the figures stack up.
I take it you are a higher rate tax payer ?
40/45 percent
Can you add value to the property, do you have funds to upgrade and maintain this property?
The London market now faces a downturn with selling prices dropping in many areas

kingstreet

Under the new PRA rules, lenders are adjusting rental cover calculators from 125% to 145% and the accompanying rates to closer to 6% from 5%.

In addition, they are taking into account the tax rate of the potential landlord in their affordability calculators.

On the OP's example, £408,000 x 75% = £306,000 mortgage. At 5.75%, that's interest of £17,595. Divided by 12 and multiplied by 145%, the monthly rent to justify that mortgage will be £2,126.

Until now, £1,593 would have been needed.