Buy-to-let question

jonat1988

Hi all,

My wife and I own a flat in London. Unfortunately it has no outdoor space which has become more desirable in the pandemic. Additionally, as the stamp duty holiday has been implemented, many similar flats have come on the market as people cease their chance to upsize. Given stamp duty <450k in London had existing relief for first time buyers, this isn’t providing much sale advantage for us. 

As such, the price we can ask for our property has significantly reduced, and a sale is hard. It’s not all doom and gloom, as prices on our next properties have significantly dropped also. However, sale at the deflated price, may not provide enough returns to justify the sale. 

This has led me to wonder about keeping the flat, and purchasing a second property. I wondered how this works with mortgage. Does joint income (plus the income from the flat presumably? ) need to be added (and multiplied by the mortgage multiple) to provide the affordability across BOTH properties? Or does the flat (that we would move to buy to let Mortgage) not count, as it will be effectively paying for itself by renters? 

If it is included in the mortgage offer... do we need a proven track record of rental income (akin to being self employed? Such as 3 years), or is it taken on market rates?

aside from second time purchase stamp duty, is there anything else I need to think about?

thanks so much in advance 

haras_n0sirrah

You will need a deposit plus moving costs for your new home (min deposit 15% at the moment)
Some lenders will ignore the other mortgage as long as the achievable rent is more than a certain figure against the mortgage
Would you need to remortgage the flat to release the deposit to move?

HelpingwhereIcan

Whenever I've taken out a new mortgage the rental income from the buy to lets have never been taken into account into rent isn't a guaranteed income (tenants could vacate etc) so I would think your joint income would be used to assess your affordability across both properties. 

icstm

Hi Jon,

Thanks for asking, as my wife and I are in the same position.

I had a chat with N/W about exactly this. It appears that their rules differ if you take an actual BTL vs convert your current mortgage in a CTL. For the CTL you need to show 3 months of rental income, which if, like us, you are still living in it, is not easy!

Please keep us posted,

icstm

Any news ?