Mortgage / buy to let advice urgently needed!!

lhchap18

Hi All,

I'm currently living in my family home which is worth roughly £80,000 and I have just under £40,000 left to pay.

I have an opportunity to purchase my fathers house from him where he wants £185,000 for (I could possibly have a further discount from him if needed but the house is worth >£200,000, so I'm already having a discount).

I'd really like to keep my existing house and possibly move it over to a buy to let mortgage, rent that out and after roughly 7 years, that house is then paid for and becomes my retirement fund in many years to come.

The issue I have is I doubt it if the banks will allow me to do this. I've done the maths and I can certainly afford it and even run the two houses should it not be occupied. My income before tax is £34,000, HSBC online calculator is saying I can borrow £166,000 but I'm assuming that doesn't take into account if I was to take a buy to let mortgage out.

I really want to keep my existing house and buy the new one, but I'm really starting to think that this isn't an option. I have access to further money, but I'd even like to keep my hands on that if possible.

Anyone have any advice or a magic wand on how I could possible have the both? As I mentioned, I could potentially get the new house for a further discounted rate, but I assume the banks would still like me to put a deposit down and not really take that into account.

Thanks all

amnblog

Brokers carry 'magic wands'.

Borrowing £166,000 does sound a stretch though.

You also need to allow £6,750 for stamp duty on the purchase.

McDizzle

Hi,

To some extent this will depend on each mortgage providers affordability criteria. If you can evidence that the rental income you receive from the BTL property more than covers the running costs of that property (insurance, mortgage & general bills) then they wont be taken into account as expenditure and wont impact the affordability on your residential mortgage for some lenders.

There are some other considerations:

If you own more than one property some lenders will reduce the maximum % you can borrow against your residential property to say max 80%.

Also although the property is worth more then what you are buying it for to protect themselves the lender will use the purchase price (not the actual value) to base their loan to value calculations on.

As an example even though the house is worth £200k the lender may use the purchase price of £185k to get their max lending as that is what your are buying it for. Also if they then have a rule that restricted lending to max 80% of that figure because you own more than one property they would only lend you £148,000 meaning you have a deposit of £37k down.

The best thing is to speak to a few different lenders, explain your circumstances and see if you will pass their criteria. They should be able to give you an initial yes or no very quickly without the need for a credit check. If you don't get any joy with that it may be worth speaking to a broker who specialises in BTL mortgages. BE AWARE YOU WILL LIKELY PAY A FEE FOR THIS. So if you find a lender willing to consider this option yourself then you will avoid this.

Feel free to ask away if you have any further questions.

Liam

amnblog

McDizzle wrote: »

Hi,
To some extent this will depend on each mortgage providers affordability criteria. If you can evidence that the rental income you receive from the BTL property more than covers the running costs of that property (insurance, mortgage & general bills) then they wont be taken into account as expenditure and wont impact the affordability on your residential mortgage for some lenders.

A number of lenders will not lend at all on the purchase in these circumstances. Regardless of affordability.

McDizzle wrote: »

If you own more than one property some lenders will reduce the maximum % you can borrow against your residential property to say max 80%.

Not if you are letting the current one.

McDizzle wrote: »

Also although the property is worth more then what you are buying it for to protect themselves the lender will use the purchase price (not the actual value) to base their loan to value calculations on

Not on a concessionary purchase

McDizzle wrote: »

The best thing is to speak to a few different lenders, explain your circumstances and see if you will pass their criteria. They should be able to give you an initial yes or no very quickly without the need for a credit check.

Good luck with that.

This is a 100% nailed on case for a Broker.

lhchap18

Thanks Both,

amnblog, wouldn't the stamp duty be £1,200 rather than the £6,750 you stated there though? I hope so anyway.

At the moment I'm looking to put a maximum of £30K deposit down, but judging by what you said McDizzle, I may have to increase that. I'll take your advice and speak to a few lenders first and then speak to a broker.

Thanks very much for your replies

katebl

lhchap18 wrote: »

Thanks Both,

amnblog, wouldn't the stamp duty be £1,200 rather than the £6,750 you stated there though? I hope so anyway.

It's a second property you would own so 3% is the correct rate

McDizzle

No problem lhchap,

Amnblog has made it seem as though the criteria I mentioned is definitely not the case however I am a mortgage advisor and I am quoting the policy of a high street bank I work for so can say that it is something that would be considered by at least 1 high street lender.

Good luck I hope you manage to find a good deal.

amnblog

That is the problem with approaching a single lender. There are one set of policies and if there is a mismatch, you are wasting your time.

A broker matches the borrower to the lender.

amnblog

katebl wrote: »

It's a second property you would own so 3% is the correct rate

Actually 3% on top of the standard £600

McDizzle

amnblog You're right about the broker service and that's a big reason why people pay a fee for it as it saves time, hassle and most likely money in the long run.

I guess I was thinking about it from my own perspective because I already have a decent level of knowledge I would feel comfortable reviewing this myself but I'm sure lots of others will not so I wasn't trying to take anything away from the service a broker can provide.

amnblog

One of the big problems in the market is that borrowers don't know what they don't know.

They are caused unnecessary cost, time, and stress because of small bits of lending criteria that they could never expect.

Mortgage applications are like icebergs where the borrowers only see the top third.