Second Home (For Residential Use) Options.

wiley25

Hello,

I've been speaking to a few banks and brokers and am hitting dead ends with my situation, what I want to achieve.

Here is my situation:

Own a house with a residential mortgage, currently at 68% LTV.

I want to buy another house, and rent out my existing one.

Keeping my current house at 85% LTV, means I would be able to release up to £15000 by remortgaging, enough for a 10% deposit on a property around £150000 (that budget I'm looking at).

Is this possible in 2017? Everyone I have spoken to face to face and over the phone has said that I need at least a 40% deposit for a second home and that lenders would not allow me to free up equity for the purpose of a deposit for a second home.

Is anyone able to confirm if the above is true, or if what I want to achieve is possible?

I'm really hoping that I do not have to sell my current property to start over.

Thank you very much in advance,

Wiley25.

P.S. My total 'loan' at my end state would be owing £72000 (BTL) on the first house and £135000 (Res) on the second. My salary is £34000, Brokers have told me it is enough to support such a debt.

AnotherJoe

wiley25 wrote: »

Hello,

I've been speaking to a few banks and brokers and am hitting dead ends with my situation, what I want to achieve.

Here is my situation:

Own a house with a residential mortgage, currently at 68% LTV.

I want to buy another house, and rent out my existing one.

Why?

Keeping my current house at 85% LTV, means I would be able to release up to £15000 by remortgaging, enough for a 10% deposit on a property around £150000 (that budget I'm looking at).

Is this possible in 2017? Everyone I have spoken to face to face and over the phone has said that I need at least a 40% deposit for a second home and that lenders would not allow me to free up equity for the purpose of a deposit for a second home.

Thats what I'm reading, its the new rules that came in start of this year, used to be 25% so you wouldnt have been eligible anyway.

Is anyone able to confirm if the above is true, or if what I want to achieve is possible?

I'm really hoping that I do not have to sell my current property to start over.

Why?

Thank you very much in advance,

Wiley25.

P.S. My total 'loan' at my end state would be owing £72000 (BTL) on the first house and £135000 (Res) on the second. My salary is £34000, Brokers have told me it is enough to support such a debt.

That would be a bit more than 6x earnings. Might be affordable for you but well above the norm for what you'll generally find, eg 4.5-5x maximum

wiley25

Thanks for the reply. In answer to your questions, the main reason is I'm upgrading is to house a growing family and want to keep the investment of a buy to let property.

leespot

wiley25 wrote: »

Thanks for the reply. In answer to your questions, the main reason is I'm upgrading is to house a growing family and want to keep the investment of a buy to let property.

In which case your £34k salary will not be anywhere near enough to service two mortgages and all of the associated costs. You really need to re-think your plans.

wiley25

Well the first house would be serviced by the rental returns, so my salary will have to service one home.

glosoli

Your first problem is that 85% ltv on a buy to let simply isn't going to happen. Furthermore, as you will be renting out your former residential home, it will be a consumer buy to let (unless you have been a land lord before) which means the affordability would be subject to residential regulation, and I highly doubt a mortgage advisor would be able to make a recommendation based on these figures.

leespot

wiley25 wrote: »

Well the first house would be serviced by the rental returns, so my salary will have to service one home.

But what happens when the tenants stop paying rent, or the boiler needs replacing, or anything else that needs a capital outlay? You would be responsible for the upkeep of two properties, plus a growing family, on a salary of £34k? That isn't going to happen.

wiley25

I see, I thought that a BTL property was worked out as per the rental income alone, not by the worse case of not having a tennant. Does this mean people with 10's of rental properties need thousands of pounds worth of other monthly income to cover all their properties!?!

leespot

What is your plan to cover the potential costs? What other debts do you have? How many children do you have? Is it a single application or does your partner work?

You have to able to cover the costs of running the BTL when the rent isn't being paid and your wages probably don't stretch to that as well as your family home. Until you have a tenant you'd be paying the mortgage and council tax on the rental property.

kingstreet

Your proposition is a let to buy and you can usually borrow THE LOWER OF 75% of the value of the property and the mortgage amount which can be supported using estimated rent must equal or exceed 145% of the monthly mortgage interest assuming a rate of perhaps 6% per annum.

So, first step is a rental income assessment from an ARLA registered letting agent.

You are viewed as an "accidental landlord" or a consumer buy to let, not a business buy to let, so the regulations are going to be tighter.

Expect lenders to look at your overall financial position nowadays and not just the rent/interest ratio.

On the purchase, there are two lenders who offer 95% mortgages with a let property in the background, more who top out at 90%. They will want to see your ARLA letter, hence the suggestion to obtain it upfront.

Provided the letting proposition is viewed as self-financing by the new residential lender, your affordability for the new residential won't be affected.

You need solid professional advice from an experienced independent broker and if you are not hearing things like what is set out above, you aren't getting it.

glosoli

Things were different in the past when things worked from rental income alone, however times have changed. Particularly in your case, as it appears to be a consumer buy to let. You can find more information here http://live.mfb.drawgroup.com/news-insight/2016/february-2016/what-is-a-consumer-buy-to-let-mortgage/