Property Valuations -BTL

bubby08

Hi guys, looking for some help, I have tried to ask my mortgage broker but I am not getting me clarity. Basically, I am trying to figure out how valuations work for BTL I am looking to purchase a property refurbish it and the let it, but I am wondering once I finish the refurbishment and then look to mortgage it on BTL agreement how is value of the property decided is it by rental income or by property value? 

I hope this makes sense. 

Thank you 

BarelySentientAI

AFAIK it's usually rental income.

Or at least that's a big component of it.

njkmr

They will value the property in the refurbished state. If it's worth £200k then that's what it's value is.
And then lend according to their other criteria.ie what rent will be achieved and your ability to meet the payments on the mortgage .

bubby08

njkmr said:

They will value the property in the refurbished state. If it's worth £200k then that's what it's value is.
And then lend according to their other criteria.ie what rent will be achieved and your ability to meet the payments on the mortgage .

njkmr said:

They will value the property in the refurbished state. If it's worth £200k then that's what it's value is.
And then lend according to their other criteria.ie what rent will be achieved and your ability to meet the payments on the mortgage .

So you think it’s purely on property value not the rental income? 

BarelySentientAI

bubby08 said:

njkmr said:

They will value the property in the refurbished state. If it's worth £200k then that's what it's value is.
And then lend according to their other criteria.ie what rent will be achieved and your ability to meet the payments on the mortgage .

njkmr said:

They will value the property in the refurbished state. If it's worth £200k then that's what it's value is.
And then lend according to their other criteria.ie what rent will be achieved and your ability to meet the payments on the mortgage .

So you think it’s purely on property value not the rental income? 

Well it depends what you are meaning by "value".

The value of the property is the property value.  But are you actually needing to know that number?

The mortgage you can get on it depends on the ability to repay - which is based on the rental income amongst other things.

bubby08

Thanks guys, maybe I should be clearer, let me give some context, my aim is as follows

I want to buy a property say for £100 with a bridging loan/light refurb mortgage
 Refurbish the property and hopefully increasing to value to £150,000 
Then take out a BYL mortgage 

my question is by the time the refurb is finished how is the LTV calulated on the BTL morgage when I pay off the bridge/Light Refub loan.

I hope this makes more sense.

Best Regards 

BarelySentientAI

bubby08 said:

Thanks guys, maybe I should be clearer, let me give some context, my aim is as follows

I want to buy a property say for £100 with a bridging loan/light refurb mortgage
 Refurbish the property and hopefully increasing to value to £150,000 
Then take out a BYL mortgage 

my question is by the time the refurb is finished how is the LTV calulated on the BTL morgage when I pay off the bridge/Light Refub loan.

I hope this makes more sense.

Best Regards 

Right, that does make more sense.

The V of LTV is effectively based on the asset resale value, so that would be the property value and income would be ignored.

Maximum amount of mortgage loan (the L of LTV) would include income potential.

Bookworm105

BTL mortgage borrowing limits ("LTV") are based on rental yield, not property value.

look at any online BTL mortgage calculator (or talk to any broker) and they will ask for rental income, not property value.as the determinant.

bubby08

Bookworm105 said:

BTL mortgage borrowing limits are based on rental yield, not property value.
No idea where the posters above get their ideas from 

Thank you book worm of that is the case how is the LTV assessed based on rental income? 

housebuyer143

bubby08 said:

Bookworm105 said:

BTL mortgage borrowing limits are based on rental yield, not property value.
No idea where the posters above get their ideas from 

Thank you book worm of that is the case how is the LTV assessed based on rental income? 

They will give you the loan based on a stress test. So if you are taking a 5 yr loan and the you are a basic rate tax payer, the calculation is say 125% @ 5.47% (in this example the 5.47% is the interest rate). 2yr have a stress rate of 5.5% or interest rate +2%, whichever is higher, normally. They stress higher rate at 145%. You will get a higher loan on a 5yr+ mortgage.

You are best to go on a BTL calculator on NatWest or similar and put in different rent amounts and it will give you a loan amount they will give you based on the rent and interest rate and your tax status. 

LTV is irrelevant of this and is based on the lenders criteria, which might be 75% LTV max and that's where the actual property value comes into play. 

Bookworm105

bubby08 said:

Bookworm105 said:

BTL mortgage borrowing limits are based on rental yield, not property value.
No idea where the posters above get their ideas from 

Thank you book worm of that is the case how is the LTV assessed based on rental income? 

have you done any reading? See section entitled: how much can you borrow ...

Buy-to-let mortgages explained | MoneyHelper

It is a multiple of the rental income only, ignoring your own income, but also starting from the point of a (significantly) larger amount of equity in the property than would be the case if you were getting a residential mortgage. Typically they also require you to have a separate residential property you actually live in, hence your own income is excluded as that is used up by your own residential mortgage.