How much can I lend? BTL + personal mortgage

99rb99

How much can I borrow if I have a BTL mortgage, from a personal mortgage point of view?

I have a personal mortgage on a house which I have been refurb'ing. I've owned it for about 1 yr. I would now like to move, and rent out this house with a BTL mortgage. I have created equity of 25% for the BTL, and I have 10% savings for the personal mortgage. But how would I be viewed from a personal mortgage point of view, would the BTL go against the amount they will loan me? I can afford both mortgages if the BTL house was standing empty for a period.

My wage is £25k/yr, I'm in a very stable job.

Current House:
Bought for £80k, now worth about £110k, it would be easy to rent it in my location for over £450/mnth.

New House I'd like:
Purchase Price £90k, I've already got £9k savings towards the deposit.

So would I still be able to borrow extra money for a personal mortgage on another house or do the lenders take into account the total BTL debt as well as my new requested personal mortgage? Or do the lenders base their decision on monthly affordability, as I feel I could easily pay for both mortgages if the house was unoccupied. So what value of personal mortgage am I able to get?

Any advice would be great, thanks.

Brighty

I know that Nationwide will disregard the BTL mortgage completely so long as they deem it 'self financing', other lenders could be the same. So you can then get whatever personal mortgage you can get for your earnings. They won't though then include the rental income as part of your earnings, they disregard both.
To be self financing, you need at least 25% equity in the BTL and the rent needs to be at least 125% of the mortgage payment

Thrugelmir

Brighty wrote: »

the rent needs to be at least 125% of the mortgage payment

Many lenders are now using 145% of the monthly interest payment. Also will apply a stress test rate

99rb99

Brighty wrote: »

I know that Nationwide will disregard the BTL mortgage completely so long as they deem it 'self financing', other lenders could be the same. So you can then get whatever personal mortgage you can get for your earnings. They won't though then include the rental income as part of your earnings, they disregard both.
To be self financing, you need at least 25% equity in the BTL and the rent needs to be at least 125% of the mortgage payment

That's good to know :-)

99rb99

Thrugelmir wrote: »

Many lenders are now using 145% of the monthly interest payment. Also will apply a stress test rate

Errrr, stress test rate? What's that? I am guessing it is just a slightly increased APR to cover them, is that right? If so, what additional % do they roughly use :-)

Thrugelmir

99rb99 wrote: »

Errrr, stress test rate? What's that? I am guessing it is just a slightly increased APR to cover them, is that right? If so, what additional % do they roughly use :-)

Varies. Could be as high as 6% - 7%.

Borrowers tend to be optimistic and not to consider what interest rates might rise to in the medium term. With property being illiquid the debt can soon spiral upwards. Unlike residential mortgage BTL are normally interest only rather than repayment. Therefore no equity builds also the state of the property may result in a lower selling price.

99rb99

Thrugelmir wrote: »

Varies. Could be as high as 6% - 7%.

Borrowers tend to be optimistic and not to consider what interest rates might rise to in the medium term. With property being illiquid the debt can soon spiral upwards. Unlike residential mortgage BTL are normally interest only rather than repayment. Therefore no equity builds also the state of the property may result in a lower selling price.

That would mean I wouldn't be any better off by renting it if if they did that. 6 - 7%, I had no idea.

kingstreet

There are lenders which ignore your let property/mortgage if it is considered self-financing.

Speak to an independent broker who will establish the best lender options for both mortgages.

lovinituk

99rb99 wrote: »

New House I'd like:
Purchase Price £90k, I've already got £9k savings towards the deposit.

Is there enough there to cover the additional 3% stamp duty you will incur? You will have to pay £2700 in stamp duty as it is an additional property.

kingstreet

Brighty wrote: »

I know that Nationwide will disregard the BTL mortgage completely so long as they deem it 'self financing', other lenders could be the same. So you can then get whatever personal mortgage you can get for your earnings. They won't though then include the rental income as part of your earnings, they disregard both.
To be self financing, you need at least 25% equity in the BTL and the rent needs to be at least 125% of the mortgage payment

Unless you do the LTB mortgage with The Mortgage Works, Nationwide requires evidence of three months rent payments before it will consider something self-financing.

Then, it will only lend upto 85% because is considers the new residential a second property.

99rb99

lovinituk wrote: »

Is there enough there to cover the additional 3% stamp duty you will incur? You will have to pay £2700 in stamp duty as it is an additional property.

Would stamp duty still apply, as it will be my old house that will change to a BTL (therefore I already own it, so wouldn't pay stamp duty on it), and the new house will become my main place of residence, so stamp wouldn't be due on that, would it??? I've enough saved for stamp duty just in case, but from the way it is described I didn't think it would end up applying to me.