Can they take assets into account to borrow for a mortgage?

CrazyStreak

I know lenders can lend about 4 times your annual wage for a mortgage, but just wondered if they also took into account the assets you have to maybe lend more.

I was going to let my house out which is paid off completely and worth 90K, and buy a house for 150K. If my wage is 25K then I could borrow about 100K towards a new mortgage. Would the fact I have a 90K 'mortgage free' house increase the amount they are willing to lend?

I would only get income from rental from the old property after the sale had been finalised so I couldn't declare that beforehand.

Thanks.

Exodi

Hi CrazyStreak,

Have you actually checked an affordability calculator? I mention this as depending on the term and the lender, 4x is on the lower end of the maximum a lender would be willing to offer. For example, I earn £45,000 and Lloyds (my bank) would lend me up to £213,750 (which is 4.75x) over 25 years. Though it may not be the 6x you're hoping for, the difference shouldn't be a massive sum and may be possible to raise as a deposit?

Secondly, assets have and can be taken into consideration (though, I would discuss this with a local broker) but I can't see how they'd do this on a second property without putting a charge on the second house? You'd also have the issue that I guess they'd class the mortgage as 100% LTV and you'd get a horrendous interest rate?

But then, I've never done that so I think this conversation is best had with an experienced mortgage broker.

LRmortgage

Lenders won't lend you more money based on your assets.
However, you could potentially get a Let to Buy Mortgage (based on the likely rental income) on the first property to release money to put towards the second property as well as getting a mortgage based on your income on the new purchase.
All of this needs careful consideration and advice from a Broker would be a good starting point.

muhandis

I can understand the appeal of being mortgage free on your current house, but the obvious solution is a let-to-buy which a broker would be able to advise on.

In effect it's the same as a lender 'taking into account' the assets you have to lend more, just that it might be a different lender for the btl and the residential mortgages.

Additionally, as others have mentioned, depending on the nature/size of your income, you could well go up to 4.75 times. Definitely speak to a broker.

CrazyStreak wrote: »

I know lenders can lend about 4 times your annual wage for a mortgage, but just wondered if they also took into account the assets you have to maybe lend more.

I was going to let my house out which is paid off completely and worth 90K, and buy a house for 150K. If my wage is 25K then I could borrow about 100K towards a new mortgage. Would the fact I have a 90K 'mortgage free' house increase the amount they are willing to lend?

I would only get income from rental from the old property after the sale had been finalised so I couldn't declare that beforehand.

Thanks.