Applying for Residential Mortgage and BTL Mortgages at the same time

vmann

Hi,

Looking for some advice as I am concerned that the mortgage lender may refuse to release funds after exchange of contracts on my house purchase!

Background:I have a residential home and another investment property. Both are mortgage free properties at the moment.
I am looking to buy a new, larger residential home valued at £800,000.
I have £100,000 deposit cash (plus adequate funds for stamp duty and legal fees etc.)
I have residential mortgage agreement in principal (DIP) for £400,000 based on my salaried income.
After I formally secure a mortgage offer for the residential mortgage (with Barclays) I plan to apply for 2 BTL mortgages for the total sum of £300,000 from another lender (Skipton) as I am short of £300k to buy the (3rd) house. The existing two mortgage free houses are worth well over £800,000 so securing the BTL mortgages shouldn't be an issue (I will also meet the 145% rental income formula).

Now, I just became aware of a potential issue:
Even though Barclays should have no concerns offering me residential mortgage of £400,000 (based on salary and clean credit score), I have read in some forums that Barclays may do a credit check between Exchange of Contracts and Completion of the sale. And during this credit check, if they become concerned about the BTL mortgages that i intend to apply for (and feel that my total loans including BTL are too high and doesn't meet my affordability criteria), they could well refuse to release funds to complete the purchase.

This could leave me in a very exposed position having already sent the mandatory 10% deposit to the sellers solicitors as part of the exchange process.

I have heard many folks have raised equity on their BTL properties to buy larger residential properties.

How can I avoid or protect myself from the situation that Barclays may refuse to release funds after exchange of contracts?
One option I considered is to do both Exchange and Completion on the same day so the lender has to release the full mortgage to my solicitors. Would this work? It would certainly protect me from having to lose the £80,000 deposit!
Any other suggestions?

Thank you!

SDLT_Geek

So your plan is to keep your existing home and incur an extra £24,000 SDLT on your £800,000 purchase (the 3% surcharge) beyond the standard amount of SDLT (£30,000)? £54,000 SDLT is a lot of money!

amnblog

You need to be careful here as although this can all be done in principle, it could all fall over if not handled correctly.

For example, mortgage application with the residential lender needs to reflect the source of the deposit and the proposed new btl mortgages.

Some residential lenders will have a problem with your letting the current residential and treating that mortgage as self funding.

The residential lender will want to see the btl offers before it releases the residential offer.

Numerous issues to consider.

A job for an experienced mortgage broker.

LRmortgage

I agree with the above, it’s all very doable but an experienced broker should handle all of the parts for you.

As already mentioned, the residential application will need to keyed to show the BTL’s even if they haven’t yet been applied for.

vmann

yes, I plan to sell the current residential property within 3 years to reclaim the 3% excess SDLT. Thanks.

Thrugelmir

vmann wrote: »

How can I avoid or protect myself from the situation that Barclays may refuse to release funds after exchange of contracts?

Barclays will become aware of the source of the deposit before exchange of contracts. Not something that you can hide from them.

dimbo61

One for a mortgage broker and good accountant experienced in BTL mortgages.
They can shop round for the best deals ( consider 5year fixed rate deals )
The accountant can tell you the most tax efficient way to finance the purchase of the properties you are interested in.