Need advice- Residential mortgage application- how to deal with repayment commitment?

jerryjc911

I'm aiming to secure an offer in the range of £215,000 to £220,000. My salary is £44,263, and without considering the rental income, my affordability is approximately £200k -220K, depending on whether the lender uses a 4.5x or 5x salary multiple. So to achieve the range of 215-220K, I need a lender than can accept 5x salary mutiple. This is the first factor that limited my choice.

I currently own a house that I’m recently renting out due to a relocation, and it’s on a residential mortgage with monthly repayments of £628. The rental income I receive is around £2,000, which covers the mortgage repayment perfectly. If I don't fact in my rental income as part of my total income, does lender tend to be okay with such self-funded repayment without deducing my affordability? When I conducted an affordability check on random lender website, including the £628 mortgage repayment reduced my affordability to around £150,000, but if I excluded this repayment, my affordability increased to £200,000-£220,000 as I wish.

My current broker told me no need to worry because lender won't concern too much as long as such repayment commitment can be self-funded. And he has submitted my application to NatWest (who can do 5X salary multiple), and docs are in the queue to be assessed by an underwriter, their current timescales are 2/3 working days.

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I’m feeling quite anxious about this, so I’ve also consulted with another broker who mentioned that only Leeds Building Society could potentially offer up to £237,000, but they would need to factor in my rental income. According to him, other lenders wouldn’t accept my rental income and would only offer a maximum of 4.5x my salary, which wouldn’t be sufficient for a £215,000-£220,000 offer. He also indicated that no other lenders would go up to a 5x salary multiple.

However, I haven’t declared such income to HMRC yet as it is recently started (plan to do that shortly)and didn’t go through an agent, so I might face challenges in verifying this income with lenders. My thought was to avoid including the rental income in the mortgage application to sidestep the complexity of verification.

Please advice and share your opinions.

jerryjc911

The key concern I have is whether lenders are generally okay with a self-funded repayment (where the rental income perfectly covers the mortgage) without it negatively impacting my affordability. I initially thought this approach would be acceptable, but if their underwriting process isn’t that flexible and they consider this as a financial commitment, they might reduce my affordability assessment. This could lead to a rejection if they determine they can’t lend as much based on that commitment.

Hoenir

Merely as observations.

You say that you are letting a property using a residential mortgage. This is in breach of your mortgage T&C's. Either obtain consent to let or switch to a BTL product.

When does your current mortgage product expire and what's the current interest rate? 

amnblog

From what you have said NatWest will not have a problem with affordability on this case.

You will be asked to prove the rental income on the current property signed tenancy agreement (preferred), or bank statements

jerryjc911

Hoenir said:

Merely as observations.

You say that you are letting a property using a residential mortgage. This is in breach of your mortgage T&C's. Either obtain consent to let or switch to a BTL product.

When does your current mortgage product expire and what's the current interest rate? 

Thanks, I will apply for consent to let and then switch to BTL when the current Mortgage expires. Current rate.4.14%, expires next May.

Jemma01

Many people are self-employed that fund themselves fully, why wouldn't you add that rental as part of your income and prove that it's been sustainable up until now? They'll need tenancy agreements and stuff, but that's up to them to request your proof.

I don't think you have a problem if you add the rental income, 2K is a lot per month