Affordability Calculation for 2nd Home

tekie

I would like to know how to go about buying a second property.
I'm currently living in a property which myself and my wife jointly owns a residential mortgage, but I'm planning to rent this out and buy a second home as a residential mortgage.

so my query is how does this work, If I go and ask for a mortgage for my second home do I need to convert my current mortgage to buy to let before hand so that the bank can offer larger residential mortgage based on my earnings, or shall I just keep the current arrangement and go for second mortgage.

This might sound like a stupid questing but I'm new to second mortgages and buy to let schemes, totally stranger so please bear with me.

Thanks in advance.

london21

When you say second mortgage, will first property still be lived in or rented out?

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

Slithery

Speak to a broker about let-to-buy mortgages.

SDLT_Geek

tekie said:

I would like to know how to go about buying a second property.
I'm currently living in a property which myself and my wife jointly owns a residential mortgage, but I'm planning to rent this out and buy a second home as a residential mortgage.

so my query is how does this work, If I go and ask for a mortgage for my second home do I need to convert my current mortgage to buy to let before hand so that the bank can offer larger residential mortgage based on my earnings, or shall I just keep the current arrangement and go for second mortgage.

This might sound like a stupid questing but I'm new to second mortgages and buy to let schemes, totally stranger so please bear with me.

Thanks in advance.

You have budgeted for the extra stamp duty?  If you are buying in England it would be an extra 3% stamp duty land tax.

tekie

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

First property to be rented out - do I need to do that before I start taking out my 2nd home mortgage which will be my future residence

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

that's what I hoped for but it did not go that way,

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

I spoke to Halifax to arrange my second home residential mortgage by they did include my first property into the calculation and not as BTL  although I insisted that this will be BTL. Hence their offer was far less that I need to buy my new home, so this is why I need some advise on how do I tackle this issue. 

london21

tekie said:

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

First property to be rented out - do I need to do that before I start taking out my 2nd home mortgage which will be my future residence

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

that's what I hoped for but it did not go that way,

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

I spoke to Halifax to arrange my second home residential mortgage by they did include my first property into the calculation and not as BTL  although I insisted that this will be BTL. Hence their offer was far less that I need to buy my new home, so this is why I need some advise on how do I tackle this issue. 

Speak with a broker. 

It will usually be rented as a BTL and they will ask what the mortgage and rental is. 

If you are currently living there think they can use the going rate figure. 

The bank will want to ensure that the BTL is paying itself and that your income from employmentwould not be paying the BTLmortgage as well as your new property mortgage. 

tekie

london21 said:

tekie said:

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

First property to be rented out - do I need to do that before I start taking out my 2nd home mortgage which will be my future residence

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

that's what I hoped for but it did not go that way,

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

I spoke to Halifax to arrange my second home residential mortgage by they did include my first property into the calculation and not as BTL  although I insisted that this will be BTL. Hence their offer was far less that I need to buy my new home, so this is why I need some advise on how do I tackle this issue. 

Speak with a broker. 

It will usually be rented as a BTL and they will ask what the mortgage and rental is. 

If you are currently living there think they can use the going rate figure. 

The bank will want to ensure that the BTL is paying itself and that your income from employmentwould not be paying the BTLmortgage as well as your new property mortgage. 

I'm currently in the process of remortgaging my current property the process is going longer than expected, its not finished yet and its with Barclays. Is it a good idea to get my second property mortgage from the same lender so there is less hassle or does that even matter?

london21

tekie said:

london21 said:

tekie said:

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

london21 said:

When you say second mortgage, will first property still be lived in or rented out?

First property to be rented out - do I need to do that before I start taking out my 2nd home mortgage which will be my future residence

If you are renting the first property then it will be converted to BTL but if you currently have a mortgage on it then they will give you approval to let.

that's what I hoped for but it did not go that way,

If you are looking to keep the first property and buy a second then they might lend you a lot less due to affordability on both mortgages as residential.

I spoke to Halifax to arrange my second home residential mortgage by they did include my first property into the calculation and not as BTL  although I insisted that this will be BTL. Hence their offer was far less that I need to buy my new home, so this is why I need some advise on how do I tackle this issue. 

Speak with a broker. 

It will usually be rented as a BTL and they will ask what the mortgage and rental is. 

If you are currently living there think they can use the going rate figure. 

The bank will want to ensure that the BTL is paying itself and that your income from employmentwould not be paying the BTLmortgage as well as your new property mortgage. 

I'm currently in the process of remortgaging my current property the process is going longer than expected, its not finished yet and its with Barclays. Is it a good idea to get my second property mortgage from the same lender so there is less hassle or does that even matter?

Not sure if its an advantage having both mortgages with the same lender. 

Barclays are usually competitive. 

If you are remortgaging now would you do BTL or wait until you secure your 2nd property.

Might be easier using the same lender, maybe if done together or short space of time saves time and sending documents twice but likely classed as 2 products. 

K_S

@tekie Based on the limited info in your posts, what you are looking for is called a let-to-buy transaction involving two simultaneous mortgages (they will need to complete the same day or no more than a couple of days apart) - one residential purchase (for your new house) and one BTL remortgage (for your current house).

Though there are a few quirks and criteria to meet on both sides of the transaction, it's a fairly straightforward process with the right lenders as long as the numbers add up. I would definitely recommend considering the use of a good broker, see here for those recommended on the MSE guide

https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Done properly, the background BTL property will be seen as self-sufficient and not impact on your affordability for the residential purchase. With a couple of lenders, they might even consider the future surplus rental income as additional income to boost affordability for the onward purchase.

The alternative is that your income streams are large enough to support both properties without the need for ignoring the BTL one.

simon_or

I've done this twice in the past 10 years and it can be a pain in the behind if not done properly as different banks have all sorts of rules about what is and isn't permitted.

There's no advantage to using the same bank. Get a good broker on the case, you will need it.

tekie

K_S said:

@tekie Based on the limited info in your posts, what you are looking for is called a let-to-buy transaction involving two simultaneous mortgages (they will need to complete the same day or no more than a couple of days apart) - one residential purchase (for your new house) and one BTL remortgage (for your current house).

Though there are a few quirks and criteria to meet on both sides of the transaction, it's a fairly straightforward process with the right lenders as long as the numbers add up. I would definitely recommend considering the use of a good broker, see here for those recommended on the MSE guide

https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Done properly, the background BTL property will be seen as self-sufficient and not impact on your affordability for the residential purchase. With a couple of lenders, they might even consider the future surplus rental income as additional income to boost affordability for the onward purchase.

The alternative is that your income streams are large enough to support both properties without the need for ignoring the BTL one.

Thanks a lot for replying in detail, this is the exact advice that I was looking for.