How to work out how much we can borrow for a second house?

T-Sil

Hi there

We are currently in the process of renting out our house and relocating to another area of the country for work.

To see if we like it etc, we decided to rent our house out until we are settled.

House no. 1 is worth 575k, with a mortgage of 348k. Rental income £1950 a month.

We are potentially looking at remortgaging this house to max BTL loan to value of 75% to release some equity to add to our deposit fund for the second house.

We should then have around 180k available as a deposit on second house but how do we work out how much we can borrow for that?
I can't seem to find a calculator that tells me that.
I know we have to pay higher rate stamp duty etc.

Combined earnings are £152k a year.

Hopefully someone can help advise if this even sounds possible?

Thank you

Thrugelmir

Speak to a mortgage broker. Too many variables to be considered to simply plug into a calculator.

That's a poor gross yield on letting the property.

T-Sil

Thanks

I guess before we did that I just wanted to get some kind of idea on how they worked it out and what was possible.

Not too concerned with the gross yield at the moment but thank you.

demontfort

I've been accepted for a second mortgage (assuming valuation is ok) with similar joint incomes and deposit albeit under slightly different circumstances, I have my own thread on this. I was advised that the max second mortgage amount would be about £406k that was on a second property valued at £555k. I ended up going for a £380k mortgage.

tlc678910

The rent normally needs to be at least 125% of the (interest only) mortgage for a buy to let (sometimes more) e.g. A property with a 1k mortgage would need to achieve £1250 and 2k mortgage £2500 so you could check your numbers meet this criteria.
Tlc

kingstreet

The rent isn't sufficient for a mortgage of £430k.

Assuming a lender stress rate of 5.5%, you would need £1,970 per month just to cover the interest, without the lender requirement for around 40% on top of that under the recent PRA rules.

Your best hope is to speak to a broker about your personal incomes supplementing the rent to make this possible. A few lenders will allow this.

kethrinejohns

Not an easy job . . .