Let to Buy situation

mhuk01

Hello,

I currently own a property with mortgage 100% paid off and worth £110k. I live in this property with my wife. We would like to purchase a property of around £180,000 (mortgage of 150k and deposit 30k).

I am self-employed and my earnings before tax are approximately 15k for tax year 17/18 and will be approx 18k for tax year 18/19. My wife is in full-time employment, earning £18,300 per year. Therefore our combined earnings are around £34,800 (taking the average of my 2 years accounts).

The potential income for renting out our current property is £675 p/m, £8,100 per year (gross). I have proof of this as when I property a few years ago, I rented it out for this price.

My question is will it be realistic for us to get a £150,000 mortgage after April 2019 (when I complete my 18/19 tax return)? And are we able to use the rental income to help show our affordability? Essentially our repayments on a new residential mortgage would be around £700-£900 per month (depending on interest rate, mortgage length etc). Therefore we know we can easily afford it by using the rental income (net around £550 per month) and our salaries. The question is of course proving this to the lender.

To further complicate matters, my wife is a BNO (British National Overseas) Hong Kong citizen, and holds a Spousal Visa. This is 2.5 year visa that is then renewed for another 2.5 years before then applying for full citizenship.

Can anyone recommend specialist lenders and brokers who can help? I've already spoken to L&C who told me as the rental income is only potential, it can't be used to help with affordability calculations on a residential mortgage. I want to get some second opinions on this, perhaps by going to more specialist brokers. Anyone that can help point me in the right direction would be much appreciated.

obay

As far as I know, BTL's work on what income you'll get from that property and they'll stress test you for affordability to cover rent voids (maybe an MA would add something more concrete.) But this is what I have been told.

amnblog

You are going off in the wrong direction here.

You want to buy with a £150,00 mortgage. You will let where you live currently.

You wish to mortgage the new property which will be a residential mortgage.

Lenders are interested in your pre tax profit not post tax. Therefore your combined income is around £38K which should be sufficient for £150,000 lending. The rental income is not a factor. (aside from using a broker to ensure the let property does not become an obstacle in the mortgage application)

Unless I have missed something, I have no idea what L&C were going on about.

mhuk01

amnblog wrote: »

Lenders are interested in your pre tax profit not post tax. Therefore your combined income is around £38K which should be sufficient for £150,000 lending. The rental income is not a factor. (aside from using a broker to ensure the let property does not become an obstacle in the mortgage application)

Unless I have missed something, I have no idea what L&C were going on about.

My mistake - I meant income pre-tax but after expenses. I have corrected the original post. I guess L&C were essentially saying that I can't use the projected rental income to boost my income, as it is in the future. My question is are they correct? Are we really just looking at a standard residential mortgage, or can some lenders take our situation into account?

DCFC79

No one can suggest brokers nor specialist lenders, you will just need to get some numbers for a couple of brokers and speak to them.

Typhoon2000

If you want to borrow more, you may need look into getting a mortgage on your current property that will be let, to use towards the deposit of your new place. This the only way potential rent can be used to secure a mortgate.
So you would be getting a Let to buy mortgage on your current place and using it to increase the deposit on your new place which will be on a standard residential mortgage.

glosoli

It may be possible for the lender to factor in the rental income if you have an ARLA registered letting!estate agencies letter confirming what the property can realistically expect to achieve and that there is ready demand in the area for properties of that type.

I wouldn't rule it out as some can include this.