Would I get a(nother) mortgage? Advice appreciated.

big_gus

Hi Folks,
Bit of a long-winded one but will try and keep it short. I currently own (and live in) a large Guest House. There is a small property attached (previous occupants owned entire building(s) but split into two when selling). They rent this out to another family who are shortly leaving and I would like to purchase it and once again have one entire home. Purchase price would be around 180-200k.

My situation is that I currently have two mortgages. One here (£212k outstanding, down from £338k when purchasing in 2008...current value is around £500k-£550k) and another buy-to-let property which has tenants in and they cover the mortgage, easily.

The second facet to this is that if we could move into the adjoining property it would mean the part of the Guest House we currently live in would become free and therefore would revert back to guest accommodation. Our calculations show this would bring in around 15k extra per annum which would comfortably cover any new mortgage. 

Before wasting the bank’s time...is it feasible/possible for me to acquire another mortgage? What is the ceiling on the loan-to-value percentage? How much would be required as a deposit IF it was doable?

“Official” net income (as shown in the accounts) from the business will go against us as it only shows - on average - around 15k per annum. These aren’t quite true figures and aren’t the extent of income (for instance, the mortgage on the buy to let property is only £300pcm but we receive £1400pcm).

Anyway, apologies for length of post. Just wanted to include as many details as possible to garner a genuine response. Any help greatly appreciated. Thank you. 

steampowered

You are wanting to buy a property for £180-200k. to live in. It sounds like this would be a standard residential mortgage.  

You can't support a residential mortgage like that on £15k of income - you can usually only borrow 4.5x your income on a residential mortgage.

You'd then presumably need consent to let, or a mortgage that allows you to run a guest house, over your current property, which would probably increase the interest rate.

What do you mean when you say "official" net income - as you saying you've been declaring less income than you actually receive? If so, that starts to sound like tax fraud. Sorry in advance if I've misunderstood!

dimbo61

Complex so employ the services of a whole of market mortgage broker who deals in BTL / Commercial lending.
They will find lenders who are happy to take on this kind of business 

Comms69

big_gus said:

Hi Folks,
Bit of a long-winded one but will try and keep it short. I currently own (and live in) a large Guest House. There is a small property attached (previous occupants owned entire building(s) but split into two when selling). They rent this out to another family who are shortly leaving and I would like to purchase it and once again have one entire home. Purchase price would be around 180-200k.

My situation is that I currently have two mortgages. One here (£212k outstanding, down from £338k when purchasing in 2008...current value is around £500k-£550k) and another buy-to-let property which has tenants in and they cover the mortgage, easily.

The second facet to this is that if we could move into the adjoining property it would mean the part of the Guest House we currently live in would become free and therefore would revert back to guest accommodation. Our calculations show this would bring in around 15k extra per annum which would comfortably cover any new mortgage. 

Before wasting the bank’s time...is it feasible/possible for me to acquire another mortgage? What is the ceiling on the loan-to-value percentage? How much would be required as a deposit IF it was doable?

“Official” net income (as shown in the accounts) from the business will go against us as it only shows - on average - around 15k per annum. These aren’t quite true figures and aren’t the extent of income (for instance, the mortgage on the buy to let property is only £300pcm but we receive £1400pcm).

Anyway, apologies for length of post. Just wanted to include as many details as possible to garner a genuine response. Any help greatly appreciated. Thank you. 

But where is the rest of the money? 

tatartan

I don’t understand the income bit. I work full time and have an income and pay tax on it correctly via PAYE. Is is possible to change my income into an “official income” and presumably “unofficial income”? Sounds great I’ll go ask HMRC how I go about doing this. 

Comms69

tatartan said:

I don’t understand the income bit. I work full time and have an income and pay tax on it correctly via PAYE. Is is possible to change my income into an “official income” and presumably “unofficial income”? Sounds great I’ll go ask HMRC how I go about doing this. 

I assume the OP runs their own business.

big_gus

Sorry for any confusion, what I meant was things like the rent I receive which aren’t included in the business accounts. So whilst the 15k is noted on accounts as income, the other income from rented property isn’t included there, it’s on the other part of the accounts. 

To the person asking whether I’m self employed, yes I am. As mentioned, I own/run/live in a Guest House. The part I live in used to be guest accommodation...so if we managed to purchase the adjoining property we would then free up this part of the house again which could be rented out. Previously when it was, it produced around 12-15k per annum...so we thought this would show any potential lender that the repayments on a new mortgage could be met comfortably. We would also be looking at putting down around 50k. 

Sadly, it appears from the answers given this isn’t possible. If you are only allowed to borrow 4.5 x official (past) income then we wouldn’t come close. 

I guess we hoped that we could use the income that would be generated by vacating and renting out our current part of the house (as proven in past accounts) may be in our favour. 

Comms69

big_gus said:

Sorry for any confusion, what I meant was things like the rent I receive which aren’t included in the business accounts. So whilst the 15k is noted on accounts as income, the other income from rented property isn’t included there, it’s on the other part of the accounts. 

To the person asking whether I’m self employed, yes I am. As mentioned, I own/run/live in a Guest House. The part I live in used to be guest accommodation...so if we managed to purchase the adjoining property we would then free up this part of the house again which could be rented out. Previously when it was, it produced around 12-15k per annum...so we thought this would show any potential lender that the repayments on a new mortgage could be met comfortably. We would also be looking at putting down around 50k. 

Sadly, it appears from the answers given this isn’t possible. If you are only allowed to borrow 4.5 x official (past) income then we wouldn’t come close. 

I guess we hoped that we could use the income that would be generated by vacating and renting out our current part of the house (as proven in past accounts) may be in our favour. 

But your official income includes rent - unless the rent is paid to a company/business?