Can I get a buy to let on a property I own outright if I’m not earning?

Grumpy_chap

redskylife said:

I own a rental property outright as well as the house I live in with my young children. (Please don’t judge, I’m only in this amazing situation because my parents died when I was young). I am a single mum and as such only work as and when I can, around the children. I don’t earn much money and because of the rental property etc I’m (rightly) not entitled to any benefits. I really need to increase my income because I’m in debt and it’s growing. So I was thinking about taking out a buy to let mortgage on the rental property but can I with little income? 

I don’t want to sell the buy to let as it’s what is paying my household bills at the moment. 

It is possible to take a mortgage on a BTL based upon the rental yield only, which is what are are looking to do.

I am not sure that the route you propose will achieve the desired aim of "increasing your income to avoid debt".  The mortgage payments on the existing rental property will reduce the net yield (further) below the current £860 per month. 

I understand the strategy to not sell the current BTL (and think it is sound), but trying to get a second BTL could be the wrong move at this point in time  Has your income been affected by recent events and will it recover once the children are back to school or normal care facility?  That may be a better strategy and the challenge then becomes a shorter-term issue.

theoretica

redskylife said:

Thanks.. I wouldn’t want a £240k mortgage though.. I’m pretty sure you need a minimum of 25% deposit left on the property for a buy to let anyway, don’t you? I’d be looking to leave more than that anyway. 

I’d ideally like to release some of the capital to purchase another property on a buy to let (so I have two therefore generating a little bit more income and owning two appreciating assets) I bought the original place for £160k so the yield is pretty healthy 😊

But as a percentage yield, it looks like you would be paying more on the mortgage than you would be getting in rent. A mortgage for £120k would need payments of more than half your rent.  It seems like your problem is you have done very well on capital appreciation - but you now want income, not capital.  Getting another property and a mortgage or two might well be great for capital growth, but not necessarily for income.   I am sure there are aspects to your plan you haven't mentioned on here, but do work the numbers out on your business plan realistically.

Thrugelmir

You need to consider selling the let property.  The potential risks sit firmly on the downside. Tenant fails to pay the rent, property requires improvement/maintenance,  interest rates rise, property is empty. The list goes on. If you are struggling now and slipping into debt. Then may not get any easier. 

warwicktate

redskylife said:

kazwookie said:

Sky blue thinking, why get your self into debt, when you have a property you 'could' sell and make your life so much easier.

Why take on a mortgage when you already own the property outright?

How much debt is there? and how much is it going up per month.?

If you sold it you would have circ. £220K when sold, if you invested that, |(\i know interest rates are not brill atm)  and paid yourself say £1K per month, then you have enough for the next 17 or so years.

I don't have the answers but good luck.

Because I want to make my money work for me, not just spend it..?  In 17 years time I’d either have nothing, or an asset (Or two!) that has appreciated in value and has provided me with an income over that time. 

Totally appreciate what you're saying, but if you sell, and do what kazwookie suggests in paying yourself a monthly income, this would give you an immediate cash boost to your monthly bank account, making your monthly bills, outgoings etc easier to cope with. And in 17 years time, I would assume you'll have been back in employment for a good few years? As your children will be getting older and in full time education for most of this time (assuming schools re-open at some point) are you considering going back into full time employment, or do you intend to become a full-time landlord? If it's the former, I personally would sell, as my employment wage would be my major income and I'd have a very healthy savings pot from the property sale. If its the latter, then obviously keeping hold of the property makes far more sense.

Either way, good luck with the BTL mortgage. Like others have said, you should be able to get one, you'll have to find a broker who understands your situation and can make it work. We were in a similar situation a few years back, and we used Leeds Building Society. TBH I can't even remember if they asked for our income, more the value of the rental property and the monthly rental charge.

D.L

kazwookie said:

Why take on a mortgage when you already own the property outright?

Leverage..?

csgohan4

D.L said:

kazwookie said:

Why take on a mortgage when you already own the property outright?

Leverage..?

for what? More Debt??

OP as your running a business, is it viable your BTL? One option would be sell and liquidate your assets if you need the money now or more money. The yield for your rent isn't great.