Chances of getting a Buy to Let morgage?

BatchedMetting

Hello again,

It doesn't look like we would be able to get a regular mortgage based on our low income for the area we live in.

Would it be worth aiming for a Buy to Let mortgage so we could buy somewhere cheaper, rent it out, then move in/sell it when we 'retire' so we have somewhere to live?

At the moment we (a couple) rent and we both work through our LTD company. The 2016/17 tax year we earned about £18k each but the following year should be a bit higher, more like £25k each.

Without a regular mortgage, and working through a limited company, would we have any chance of getting a 75% BTL mortgage, providing the rent covered enough for the repayments to pass the stress test?

Or do you really need a mortgage of your own first?

Thanks.

amnblog

With most Lenders you do as they don't want you using the 'back door' by buying as a buy to let when your intention is to live in the property.

The other issue is that you will need a large deposit for a buy to let.

BatchedMetting

Thanks, that is what I've heard.

Even though the deposit requirement is larger, we would probably aim to get a place to rent out with a £25k deposit for the BTL.

Whereas if we wanted to buy somewhere locally to live in, we'd need a £100k deposit at least.

So although a BTL isn't ideal, it would allow us to get on the ladder, so to speak.

Thanks.

kingstreet

As you don't own your own property, any lender considering you for a BTL will want to ensure you could afford it using residential affordability, rather than on rental income calculations.

BatchedMetting

Thanks, but what does 'using residential affordability' mean?

kingstreet

The opposite of treating is as a buy to let, which is based on rental income.

The lender is going to look at it and say no if you can't demonstrate you can afford it as a residential proposition. Effectively, the chances of you buying it to live in it are greater, in their estimation.

BatchedMetting

Thanks.

So if I was looking at a £100k BTL property and had a 25% deposit (and no mortgage elsewhere and living in a rented house) hoping to get a BTL mortgage of £75k, they would want to see I could afford the repayments of £438 per month (at 5% interest rate on a 25 year mortgage)?

Using this calculator: https://www.google.co.uk/search?q=mortgage+repayment+calculator

If that is correct, how would they determine I could afford the £438?

Thanks a lot!

kingstreet

No. The lender will use its own residential affordability calculator. It won't just work out the mortgage cost.