Buy to let mortgage

NOVAMET21

Hi

I have got few questions in regards to buy to let mortgage if I may please.

Do lender take just the estimated rental income to decide on the mortgage amount? Do lender also check the annual income of the applicant? The reason I ask this is as long as there is a capital, will the applicant qualify to get mortgage and don't need to declare his/her income?

Doing some maths on this, can you check if my thinking is correct for buy to let mortgages?
House Value - £200,000
25% deposit - £50,000
Mortgage - £150,000
Stamp duty - £7,500
Interest Rate - 2.29%
Interest only mortgage - £286 per month
Estimated rental income - £900 per month

So, am I correct to think that as long as there is a capital of £60,000 in the above example, there is no need to assess the annual income?

I would really appreciate your help. Thanks

[Deleted User]

Depends on the lender. Depends on the applicant. Depends on the underwriter.

Some lenders have minimum income requirements and you need to show income proof that you earn over a certain amount
Some lenders have no minimum income requirements but you have to show that you have an ability to support yourself financially with
Some lenders waive requirements if you are an experienced landlord. And put more checks in place for first time landlords
Most now request some sort of proof of income as they lend different amounts depending on your tax banding.

And then sometimes the underwriter on the case just isn't happy with some niggly little detail so can decide to request documents that wouldnt be otherwise requested.


What lender are you trying to use?
Do you own your own home?
Do you have an income of some sort?
Why dont you want them to assess your annual income?

djphig

Different lenders have different rules.

Some require a minimum income, some don't. Some have a minimum income requirement if you are a first time landlord.

Also, some will do a full income assessment whilst others will not.

I'd speak to a mortgage broker

NOVAMET21

Thanks Deleted_User.

What lender are you trying to use?
- Not sure.
Do you own your own home?
- Yes
Do you have an income of some sort?
- Yes, household income is £70k+
Why dont you want them to assess your annual income?
- It's not that I don't want them to assess my income, I'm just trying to understand the lending criteria. As I own my house that I live in and my salary is sort of tied in the current house so I was thinking whether the lender would look at the rental income as a primary income and annual income as secondary income as a back up.

[Deleted User]

ANMOLAG wrote: »

Thanks Deleted_User.

What lender are you trying to use?
- Not sure.
Do you own your own home?
- Yes
Do you have an income of some sort?
- Yes, household income is £70k+
Why dont you want them to assess your annual income?
- It's not that I don't want them to assess my income, I'm just trying to understand the lending criteria. As I own my house that I live in and my salary is sort of tied in the current house so I was thinking whether the lender would look at the rental income as a primary income and annual income as secondary income as a back up.

The BTL is expected to be self financing. And based on these figures it should pass most lenders criteria.
Your annual income is purely assessed as
'does it meet the minimum required amount?'; and
'is the applicant supporting their own lifestyle?'

Essentially they want to see you arent buying a BTL to support your current spending as they want the BTL to cover its own expenses and not be used for anything else .

On the bare bones of what you've said here it shouldnt be an issue.

Seek out an accountant for advice if you are in it for the long run and especially if you are higher rate tax payers. Got to think about LTD company BTL (more expensive mortgages but more tax efficient), maybe setting as tenants in common if keeping in personal names but one of you is a higher earner and the other isn't

NOVAMET21

Got to think about LTD company BTL (more expensive mortgages but more tax efficient), maybe setting as tenants in common if keeping in personal names but one of you is a higher earner and the other isn't[/QUOTE]

Is this where the property is bought under a company name rather than an individual's name? I have heard about this but not sure which option would be beneficial financially.

I'm a high earner and my other half isn't. Can I put the house in her name so that we pay less tax?

Thanks

[Deleted User]

ANMOLAG wrote: »

Is this where the property is bought under a company name rather than an individual's name? I have heard about this but not sure which option would be beneficial financially.

I'm a high earner and my other half isn't. Can I put the house in her name so that we pay less tax?

Thanks

You can do either of these. Some people want he cheapest mortgage which is done through personal names, and then set ownership at 99% to the low earner and 1% to the high earner.
Othertimes they will go for a LTd company which is done as a SPV and bought as ANMOLAG Property Ltd for example. The tax benefits are better in certain circumstances but a lot of ins and outs. If you know anyone who is an accountant then try get some advice. Brokers arent allowed to steer you one way or another as we arent tax advisors.

There are some very knowledgeable people around here so maybe one of them will rock up with the positives and negatives about ltd company btl.

I dont do much BTL anymore, market died off with the tax changes so wouldnt be able to go in to much more details

NOVAMET21

Deleted_User wrote: »

You can do either of these. Some people want he cheapest mortgage which is done through personal names, and then set ownership at 99% to the low earner and 1% to the high earner.
Othertimes they will go for a LTd company which is done as a SPV and bought as ANMOLAG Property Ltd for example. The tax benefits are better in certain circumstances but a lot of ins and outs. If you know anyone who is an accountant then try get some advice. Brokers arent allowed to steer you one way or another as we arent tax advisors.

There are some very knowledgeable people around here so maybe one of them will rock up with the positives and negatives about ltd company btl.

I dont do much BTL anymore, market died off with the tax changes so wouldnt be able to go in to much more details

Thanks. Is BTL really dead?
I was more thinking of it would be a passive income and would be ideal retirement income option in the future.

Thrugelmir

ANMOLAG wrote: »

So, am I correct to think that as long as there is a capital of £60,000 in the above example, there is no need to assess the annual income?

Capital doesn't repay the mortgage. Your ability to fund the mortgage and other costs in the event that the property generates no rental income will be a consideration. The property might be empty for a period or the tenant might default on payment.

dimbo61

The figures have to stack up as your running a business with your BTL.
With the extra stamp duty and costs involved in buying and preparing a property for the rental market this can wipe out your first year's income.
Being a landlord has a large number of responsibilities and is like any job it requires work.
Please don't think you can just get a lettings agent to take on the responsibility.
The buck stops with the Landlord