Property Valuations -BTL

BarelySentientAI

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? 

You're still asking about two different things by saying LTV.

There are two bits - how much you can borrow, and then what LTV that amount of borrowing counts as.  You're using the same name for both parts.

@Bookworm105 because LTV includes both loan amount (which is based on rental income) and property value (which isn't directly).  You've even said exactly the same thing in your own answer.  Don't be snippy when the question isn't clear.

Bookworm105

BarelySentientAI said:

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? 

You're still asking about two different things by saying LTV.

There are two bits - how much you can borrow, and then what LTV that amount of borrowing counts as.  You're using the same name for both parts.

@Bookworm105 because LTV includes both loan amount (which is based on rental income) and property value (which isn't directly).  You've even said exactly the same thing in your own answer.  Don't be snippy when the question isn't clear.

Snippy?
the question was perfectly clear and the first to reply was correct, the second was wrong.
That is all that needed saying, you chose to muddy by going off on a tangent focusing on the word value. If you look I put LTV in "" because that really is the wrong phrase to use when explaining BTL mortgages.

BarelySentientAI

Bookworm105 said:

BarelySentientAI said:

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? 

You're still asking about two different things by saying LTV.

There are two bits - how much you can borrow, and then what LTV that amount of borrowing counts as.  You're using the same name for both parts.

@Bookworm105 because LTV includes both loan amount (which is based on rental income) and property value (which isn't directly).  You've even said exactly the same thing in your own answer.  Don't be snippy when the question isn't clear.

Snippy?
the question was perfectly clear and the first to reply was correct, the second was wrong.
That is all that needed saying, you chose to muddy by going off on a tangent focusing on the word value. If you look I put LTV in "" because that really is the wrong phrase to use when explaining BTL mortgages.

The original question said "how is value of the property decided".  Pretty sure that trying to work out what the OP meant by that was not a tangent.

And yes, "No idea where the posters above get their ideas from" is snippy.

bubby08

Bookworm105 said:

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. 

Thank you for all the information,

so am I correct in assuming that House Value determines the deposit 25% and the expected rental determines the limit of lending based on personal financial circumstance? 

Thanks all 

housebuyer143

bubby08 said:

Bookworm105 said:

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. 

Thank you for all the information,

so am I correct in assuming that House Value determines the deposit 25% and the expected rental determines the limit of lending based on personal financial circumstance? 

Thanks all 

Yes, correct.. 

bubby08

Thanks so a further illustration which I have had confirmed by a Calculator,

I want to buy a property for £250,000
my deposit at 25% is £62,500
my lending is £187,500
I update the property and the property is now valued at 275,000
I now refinance the property with a BTL and it’s valued as having a rental income of £1,325
I can refinance and take 254,400 back out ? the property 

theartfullodger

Property is worth what it's worth (an estimate).  Your circumstances include rental income (an estimate).

There are no rules.  Different lenders have different processes.


Strangely, agents usually estimate high.  Who'dof guessed that!

housebuyer143

bubby08 said:

Thanks so a further illustration which I have had confirmed by a Calculator,

I want to buy a property for £250,000
my deposit at 25% is £62,500
my lending is £187,500
I update the property and the property is now valued at 275,000
I now refinance the property with a BTL and it’s valued as having a rental income of £1,325
I can refinance and take 254,400 back out ? the property 

You still need to adhere to the lenders max LTV, which is probably 80% at a push, most are needing a 25% deposit. Assuming 25% deposit, you could only take out £206k and that is the max. 
At this point the loan is decided by the rent. A rent of £1325 might not support a loan of £206k, you would have to use the calculator and find out, as again, it's all really dependent on the interest rate you choose, the length of the fixed rate you go for and your tax bracket.

njkmr

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? 

No, I did the same as you buying my properties. Bought cash and did them up. 20+ years ago.
Got them valued at say £100k. Got btl mortgage for 75%' and proved that my rental income could more than pay for the 75k mortgage repayments . Used the cash received then to buy next one, do it up, rinse repeat. You have to show you have a decent stake in the property and that you are able to meet the payments.
My income and outgoings were taken into account as if the property is empty and no rent they still want you to have funds to pay mortgage. If you have very high outgoings already then it may be negative to a mortgage lender.