Consent to let vs BTL - affecting borrowing

comptp

Hi,
We have a house (1) that was rented out 7 years ago under a normal mortgage with a consent to let agreement, currently rented out for £550 PCM with a mortgage of £450pcm. Worth 150k, with a 73k mortgage left. 

We then have a second mortgage (2) for the house we live in, under normal conditions. 

We plan to sell house 2, we called our lender on Friday (both same company), in the end we fell 20k short on the DiP. The advisor suggested that’s because house 1 is consent to let not buy to let, meaning it takes that 73k off our lending potential. So we’re switching 1 to BTL today, which will take 18/24 days. 

Is that other people’s understanding or BTL vs CTL? Anyone have a similar experience?

Just panicking as we have an offer accepted on a house, they’re cool to wait while we get an offer on house 2. But worried we’ll get all the way there and fall at that hurdle... 

Grateful in advance

[Deleted User]

What lender are you in discussion with? 
Everyone has a different take on ctl but most will ignore it if its rented but not take the income either.   
Some will take the commitment but then the income as well 

I can't think of one that will distinguish a long term ctl against short term btl. Most would give the same new borrowing amount generally 

comptp

Hi, it’s Nationwide. And, if I untick the ‘is this property rented let button’ on their online tool it replicates my experience (so takes it from C460k to 390k, which is what happens. Whereas when ticked with details in, it stays at 460k.

i should say both mortgages currently with them.

[Deleted User]

Doesn't sound like it's distinguishing between ctl or btl though.  Sounds like it just thinks the rental isn't self financing and is taking it as a commitment

We'll consider the outstanding balance of any mortgages that are continuing, unless there is a simultaneous TMW Let to Buy application submitted for the existing residential, or they are let and satisfy the following:

• Let properties are treated as self-financing where the rent received is at least 145% of the current mortgage payments.
• Where the rent received is less than 145% of the current mortgage payment, the difference will be included in the affordability calculation

You need to either increase the rent or decrease the mortgage payment to get it to fit. 
Or go to a lender that just does a more straightforward calculation on background properties 

comptp

I’m semi stuck with them as mortgage on property 2 still has until 2021 left on fixed term.

Any thoughts on why calculating tool doesn’t do those sums given you input it?

[Deleted User]

Your mortgage payment of £450 requires a rent of £652.50 for it to be disregarded.
What is your new btl mortgage going to cost each month?  Less?

The calculation effectively adds £100 a month to your outgoings as 145% of your mortgage payment is higher than your rental income. It's this extra £100 commitment that is brining your affordability down it appears

If your new btl mortgage will be cheaper and 145% of it will be less than £550 (current rent) then it will be ingored for the new residential mortgage. 

Not sure what you mean about the calculating tool

comptp

I used their detailed affordability online calculator, which includes the second property rental details (including the mortgage and rent). When completed with all details, it offers 460k from a combined salary of c100k, 2k on a card and 300 worth of loan. Small travel expenses etc. She seemed convinced it was the BTL vs 
CTL issue. Chatting to mortgage works guy tomorrow to start process of switching mortgage... only has 15 years ish left on mortgage as it stands

[Deleted User]

I don't see how changing to btl will change anything. 
Nationwides criteria states that the affordability calculation needs to cover all outstanding mortgages at time of completion.  The mortgage balance will be the same so the outcome will be the same. 

comptp

We do have the option of my wife’s twin sister taking over the rental mortgage on her own as they took the house out together as a joint mortgage, so it’s shared between the two of them. We trust her implicitly. Sounds like it might be the only way to be sure, don’t want to get locked into the BTL mortgage to find out we then can’t borrow what we need for the new house. Crazy really given even after bills we’ll have 3k spare a month...

appreciate your responses  

[Deleted User]

To be honest, based on your numbers quoted here it feels like the case should fit no problems.  I'm thinking perhaps a keying error might be possible 

comptp

I’m assuming even credit rating hadn’t played out as shed ran through salary and outgoings, only got to the point of saying ‘based on your initial details we’d lend you 390k’ she didn’t ask permission to search or anything. She then went back to run through and said it’s because of the CTL...  I’m at a loss!

PS we both have credit scores over 475 on clear score and 999 on Experian