BTL mortgage with maxed out credit card

paddysreturn

Hi, 

I would like to rent out my flat and rent somewhere else. The BTL mortgage I was looking for is 70% LTV, 2.2x annual salary and 135% rental income vs mortgage payments. 

However, I have  a 16k credit card, which has been maxed out for several months while I prioritised clearing other higher interest debts (the CC is ‘only’ 7%).

Is the CC a roadblock to me getting a BTL mortgage? If so, do I really need to get it down 50% to be eligible or can 90%, 80%, 70% do the trick?

As a final mention, part of the 70% was to clear the cc. I could request 60% if that gives me a better chance of success.

Thanks in advance for any response 

K_S

@paddysreturn Based on how I interpret the limited info in your post, I doubt the 16k cc debt would stop you from getting a BTL mortgage on its own. Not sure where you got the indication that it might. Of course there might be other relevant info in the background.

The tricky bit will be if you want to first sort out the BTL mortgage and only then move to a rental.

paddysreturn

Hi K_S, 

Thank for your reply. 

Originally I was planning to do a LTB, Using some of the equity in my current flat as a deposit for a second (but main) property. 

About 9 months ago, I spoke to an advisor from one of the major companies. I had considerable debt at the time (unsecured = 0.7 x annual salary ( 0.5x in loans and 0.2x in credit cards)). He advised me that by paying the loans I would free up more borrowing power (obviously). I got the debt down to 0.3 x annual salary (0.1x loan and 0.2x cc) but when I asked him for an updated figure he told me that the fact that my cc was continually maxed out was a blocker and I need to get it down to 40% - 50% of max. 

As a further complication, the market where I was planning to move to is currently very hot and so I considered just renting out my property, renting somewhere else until the market cools down and the purchasing but it seems from other posts that mortgage companies don’t like that scenario. 

I’ve lost some confidence in the mortgage advisor as I feel that the information he is giving me now is different to when I started out. Additionally, I don’t feel comfortable with his suggestion of taking out more CCs so that my % of credit used figure reduces. 

It’s such a big decision that I don’t want to act in haste and repent at leisure. 

K_S

@paddysreturn The aspects of your finances that are relevant when you are doing an LTB (ending up with 2 mortgages, 1 BTL and 1 resi) and that when you are planning to simply rent out your current property (BTL) and move into a rental yourself, will be different.

I don't know in what context it was said but taking out more credit cards to reduce debt-utilisation isn't anything that I have advised clients to do to improve their chances of a mortgage.