Equity and broker issue

Jesse009

Hello all,
The current fixed rate on my Residential mortgage is coming to an end in september. I have informed my broker to get me a new deal. I also wants to borrow extra money (equity) at the same time. The residentia property belongs to me and my hubby. However I 

Jesse009

Hello all,
The current fixed rate on my Residential mortgage is coming to an end in September. I have informed my broker to get me a new deal. I also wants to borrow extra money (equity) at the same time. The residential property belongs to me and my hubby. However I have another flat in my name (bought before I get married). I have just been informed by the broker that due to the fact that  there is  no rental profit showing on your tax return I am unable to borrow extra money as the BTL mortgage affects my affordability. Is this true? There is no profit on  the rental because the tenant rent is just enough to pay the mortgage and the service charge. Can anybody help to shed more light please
Thanks

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ACG

Have you declared the income and expenditure to the tax man? If not then that is the biggest issue. 
The profit is one issue, if there is no profit then you might need to declare that mortgage as an expense - but maybe not, it depends on the details. 

If you are not declaring it, you are committing tax evasion and most decent brokers are not going to want to help as they are then getting their hands dirty.  

Jesse009

ACG said:

Have you declared the income and expenditure to the tax man? If not then that is the biggest issue. 
The profit is one issue, if there is no profit then you might need to declare that mortgage as an expense - but maybe not, it depends on the details. 

If you are not declaring it, you are committing tax evasion and most decent brokers are not going to want to help as they are then getting their hands dirty.  

Thank you ACG
Yes my accountant declared the income and expenditure to the tax man. That was when my broker noted there is no profit. The monthly rent is what I use to pay the mortgage and the service charge every month. My broker has my bank statement. He can see the rental income , the mortgage amount and the service charges. Nothing is hidden. I just don't know how that can affect getting money (equity) from the residential property.

CSI_Yorkshire

Any time that the BTL has extra costs or lower income (maintenance?  empty periods? interest rate change?) then it is an expense that is not covered by the BTL income.

Usually, the profit from the BTL will cover this period.  You don't have any profit, so that period needs to be covered from your other income - i.e. the income that is being considered for your residential mortgage.

To the residential lender, this is an increased risk that you will not always be able to afford your mortgage payments.

ACG

Speak to another broker. 
If it is all declared, then I think there should be options. 

Some lenders will work on the assumption the rental is on interest only (rather than repayment which is what I assume yours is?). Some lenders will just ignore it if it is self funding - ie £1k per month mortgage and £1k per month rent.

I will be honest in that it has been a while since I have looked into something like this and a lot has changed with interest rates so lenders may have tightened up but I dont think so. But there is no harm getting a second opinion from another broker. 

Jesse009

ACG said:

Speak to another broker. 
If it is all declared, then I think there should be options. 

Some lenders will work on the assumption the rental is on interest only (rather than repayment which is what I assume yours is?). Some lenders will just ignore it if it is self funding - ie £1k per month mortgage and £1k per month rent.

I will be honest in that it has been a while since I have looked into something like this and a lot has changed with interest rates so lenders may have tightened up but I don't think so. But there is no harm getting a second opinion from another broker. 

Thanks ACG.
Yes the BTL is on repayment. I am on the look out for another broker for a second opinion. Thank you

Jesse009

CSI_Yorkshire said:

Any time that the BTL has extra costs or lower income (maintenance?  empty periods? interest rate change?) then it is an expense that is not covered by the BTL income.

Usually, the profit from the BTL will cover this period.  You don't have any profit, so that period needs to be covered from your other income - i.e. the income that is being considered for your residential mortgage.

To the residential lender, this is an increased risk that you will not always be able to afford your mortgage payments.

Thanks
Its a bit clearer now with your explanation. I will check with other broker as well. Thank you for your response

JMA74

A lot of residential lenders will require the background Btl to meet current stress testing to be classed as self financing and ignored in the background 

Had a remortgage last week where 2 years ago the background property was ignored completely, and this time round it's being taken as £600 monthly commitment as the stress testing has changed

Could be something along these lines where its just not renting for enough to be ignored