Mortgage for second property

SuperHan

Hi,

My husband and I currently live in a mortgaged flat (currently about 60% LTV based on our last remortgage, but this valuation was based on our purchase price 4 years prior and an automatically calculated uplift - I actually think we are probably closer to 70% if they were to revalue today).

We think we would massively struggle to sell the current apartment, and so are looking to move out and retain this (renting it out) and buying an additional property.

We are trying to get an idea of how much we could maybe borrow (so that we can start narrowing down locations we can afford to live in), and I'm not sure what I'm doing when looking at the calculators on lenders websites.

I assume we can't count the rent income as income as it's not guaranteed (and we haven't even looked for tenants), but we should put our current mortgage payments down as debt payments?

We would hope to remortgage to an interest only BTL mortgage, which would be significantly less than we are repaying now, so putting the entire mortgage on the calculator may show that we could borrow less than we actually could (?!).

I'm going to get a mortgage broker in due course, but it feels a bit early to be doing that as at this stage we don't even have a new deposit saved - but knowing how much deposit we would need may depend on how much we could borrow.

Any advice gratefully received!

YHM

Never to early to contract a broker. They will be able to provide you guidance on how much you could borrow for your onward purchase, as well as guide you on switching your main property to a BTL.

Have you considered the stamp duty surcharge on second property ownership?

SuperHan

YHM wrote: »

Never to early to contract a broker. They will be able to provide you guidance on how much you could borrow for your onward purchase, as well as guide you on switching your main property to a BTL.

Have you considered the stamp duty surcharge on second property ownership?

Thanks - good to know. I didn't know if they wouldn't be interested given how far we are away from actually purchasing.

And yes - I'm a tax advisor, so unfortunately the SDLT surcharge is first and foremost in my mind (and a significant contributor as to why we don't have a deposit yet!).

kingstreet

Some lenders will ignore your let property/mortgage as self-financing so it will neither hinder nor help the affordability for your residential purchase.

It may be worth getting a written rental income estimate from an ARLA registered letting agent before appointing a broker to advise you.

Thrugelmir

SuperHan wrote: »

And yes - I'm a tax advisor, so unfortunately the SDLT surcharge is first and foremost in my mind (and a significant contributor as to why we don't have a deposit yet!).

Likewise is letting the property viable?

SuperHan

Thrugelmir wrote: »

Likewise is letting the property viable?

Yes - we won't be doing it for a monthly profit, rather that we will have a significant amount of capital paid on the apartment which will have been covered by the rent.

At least I don't have to pay anyone else to think about how I can structure my affairs more tax efficiently :rotfl: