Renting house out and buying another
Discussion
Hi Chaps / Chapettes,
Hope someone may be able to assist with some questions regarding a possible buy to let.
Story is, trying to sell current flat. It hasn’t been on the market long and we have had quite a lot of viewings but little in the way of (proceedable) offers. Thing is, due to a number of reasons far too boring to mention, we are now likely going to lose our onward purchase – a very much ‘dream’ home which we could have seen ourselves in for many years to come. Not wanting at this point to settle for something inferior, we are thinking of getting something much cheaper whilst being able to keep our current place as an investment.
In light of the above, just have a few questions regarding the possibility of renting our current place out and still being able to get somewhere else. Our current mortgage is approx £700 a month, and similar flats in our area rent for about £1100-1200 per month. I would assume this would be ok in general to get consent to let from our current lender, and if they don’t hike the rate up for a buy to let situation, the rent is approx 150% of the mortgage (monthly).
My questions are how this would affect a second purchase which we would actually live in.
Firstly, as the rent could comfortably cover the first mortgage and give some extra to cover maintenance etc, do we still need to be able to meet ‘both’ mortgages in full each month or will the first mortgage be cancelled out by the rent, allowing us to get a normal salary multiple to use on the second place?
E.g., If we can borrow say £300k between us, would the fact that the mortgage is more than covered on the first place mean we can still borrow £300k for the second place? Or will the (say £150k) borrowed on the first place reduce our borrowing allowance on the 2nd place to £150k also?
Secondly, how is our current flat valued? Will it be valued as part of the consent to let process because its now worth about £50k more than when we bought it due to us refurbing it. If it doesn’t get valued at the level its being sold at now, we don’t have the available equity to take and use as a deposit on a second place (while leaving 25% on the original flat).
Just to add, gross yield on the rental would be (if rented at £1100pm) around 7.5% on our purchase price a couple of years ago, which is around £50k less than it is 'worth' now.
I’m sorry if the above doesn’t make much sense but I’m new to all this personally.
Thanks
P.S I am aware of the tax issues / maintenance costs but at the moment am just trying to gauge if its even possible.
Hope someone may be able to assist with some questions regarding a possible buy to let.
Story is, trying to sell current flat. It hasn’t been on the market long and we have had quite a lot of viewings but little in the way of (proceedable) offers. Thing is, due to a number of reasons far too boring to mention, we are now likely going to lose our onward purchase – a very much ‘dream’ home which we could have seen ourselves in for many years to come. Not wanting at this point to settle for something inferior, we are thinking of getting something much cheaper whilst being able to keep our current place as an investment.
In light of the above, just have a few questions regarding the possibility of renting our current place out and still being able to get somewhere else. Our current mortgage is approx £700 a month, and similar flats in our area rent for about £1100-1200 per month. I would assume this would be ok in general to get consent to let from our current lender, and if they don’t hike the rate up for a buy to let situation, the rent is approx 150% of the mortgage (monthly).
My questions are how this would affect a second purchase which we would actually live in.
Firstly, as the rent could comfortably cover the first mortgage and give some extra to cover maintenance etc, do we still need to be able to meet ‘both’ mortgages in full each month or will the first mortgage be cancelled out by the rent, allowing us to get a normal salary multiple to use on the second place?
E.g., If we can borrow say £300k between us, would the fact that the mortgage is more than covered on the first place mean we can still borrow £300k for the second place? Or will the (say £150k) borrowed on the first place reduce our borrowing allowance on the 2nd place to £150k also?
Secondly, how is our current flat valued? Will it be valued as part of the consent to let process because its now worth about £50k more than when we bought it due to us refurbing it. If it doesn’t get valued at the level its being sold at now, we don’t have the available equity to take and use as a deposit on a second place (while leaving 25% on the original flat).
Just to add, gross yield on the rental would be (if rented at £1100pm) around 7.5% on our purchase price a couple of years ago, which is around £50k less than it is 'worth' now.
I’m sorry if the above doesn’t make much sense but I’m new to all this personally.
Thanks
P.S I am aware of the tax issues / maintenance costs but at the moment am just trying to gauge if its even possible.
Edited by vescaegg on Monday 20th May 14:49
Edited by vescaegg on Monday 20th May 14:50
I am no mortgage expert, but I was under the impression that a buy to let mortgage had to be on a property with something like a 125% return against the rental amount, ie mortgage is £1000, rent would therefore need to be £1250 pcm, plus you need to be able to demonstrate that you can sustain the mortgage payments for a certain amount of time if its empty.
Probably be easiest to just call your current mortgage provider and ask them to confirm
Probably be easiest to just call your current mortgage provider and ask them to confirm
If your current flat is accepted as a BTL, then this should have no effect on your next mortgage, which will be based on salary in the normal way. The point of a BTL mortgage is that it is based on rental income, not your own.
The flat will be valued on both its potential rental and market value. Your lender will have a maximum lending amount - something like "the lower of 120% of rental income or 80% of market value" - but each lender has their own criteria.
The flat will be valued on both its potential rental and market value. Your lender will have a maximum lending amount - something like "the lower of 120% of rental income or 80% of market value" - but each lender has their own criteria.
Dominicc01 said:
If your current flat is accepted as a BTL, then this should have no effect on your next mortgage, which will be based on salary in the normal way. The point of a BTL mortgage is that it is based on rental income, not your own.
The flat will be valued on both its potential rental and market value. Your lender will have a maximum lending amount - something like "the lower of 120% of rental income or 80% of market value" - but each lender has their own criteria.
This. The flat will be valued on both its potential rental and market value. Your lender will have a maximum lending amount - something like "the lower of 120% of rental income or 80% of market value" - but each lender has their own criteria.
In the past you were able to add the rent ie £1000pm, £12,000 per year to your own salary and multiply away to afford more and more. I wouldn't be surprised if this wasn't the case any more it shouldn't really have been allowed back in the day. They will instead view the rent as enough to cover the BTL mortgage and more thats a separate business then you have your family home calculated on your salary in the usual way,
BoRED S2upid said:
Dominicc01 said:
If your current flat is accepted as a BTL, then this should have no effect on your next mortgage, which will be based on salary in the normal way. The point of a BTL mortgage is that it is based on rental income, not your own.
The flat will be valued on both its potential rental and market value. Your lender will have a maximum lending amount - something like "the lower of 120% of rental income or 80% of market value" - but each lender has their own criteria.
This. The flat will be valued on both its potential rental and market value. Your lender will have a maximum lending amount - something like "the lower of 120% of rental income or 80% of market value" - but each lender has their own criteria.
In the past you were able to add the rent ie £1000pm, £12,000 per year to your own salary and multiply away to afford more and more. I wouldn't be surprised if this wasn't the case any more it shouldn't really have been allowed back in the day. They will instead view the rent as enough to cover the BTL mortgage and more thats a separate business then you have your family home calculated on your salary in the usual way,
I will do some proper sums to make sure the equity / values will work overall and then maybe have a chat with my bank.
Dominicc01 said:
If your current flat is accepted as a BTL, then this should have no effect on your next mortgage, which will be based on salary in the normal way. The point of a BTL mortgage is that it is based on rental income, not your own.
Incorect, whether its BTL means nothing at all. Also, BTL mortgages are underwritten in almost the exact same way that residential mortgages eg they ask you for proof of income and most lenders have a minimum income requirements nowadays irrespective of the rental figures.The way the residential lender will view the BTL is purely on the figures involved. If the mortgage is £100 a month more than rental received, they will take the £100 pm as if it was a personal loan and reduce the borrowing in the same way.
PS: I'm on holiday in Portugal at the mo, sorry for slow reply
Sarnie said:
Incorect, whether its BTL means nothing at all. Also, BTL mortgages are underwritten in almost the exact same way that residential mortgages eg they ask you for proof of income and most lenders have a minimum income requirements nowadays irrespective of the rental figures.
The way the residential lender will view the BTL is purely on the figures involved. If the mortgage is £100 a month more than rental received, they will take the £100 pm as if it was a personal loan and reduce the borrowing in the same way.
Ah well none of mine work like that. My BTL mortgages are assessed solely on the basis of the rental income AFAIK. The way the residential lender will view the BTL is purely on the figures involved. If the mortgage is £100 a month more than rental received, they will take the £100 pm as if it was a personal loan and reduce the borrowing in the same way.
Sarnie said:
Who are they with and how long have you had them?
Jersey Home Loans - a subsidiary of what used to be Kent Reliance. Been with them variously since 2007, although the most recent BTL mortgages were taken in 2011. Been looking recently at another property, and the only thing that seems to matter for lending purposes is that the loans are less than the relevant proportion of MV or rental income multiple. Our personal income doesn't come into it.When we last obtained a mortgage on our own house (also in 2011), we were up to around 4.75x income.
rfisher said:
So you can buy 4 btl at £100k each if you have £100k cash for 4 £25k deposits, and then get a mortgage at 4.5x joint income for your residential property if you can make at least ~ 15% deposit?
Hmmmmm ...
This is what i thought which is why I asked. It sounds way too good to be true.Hmmmmm ...
But this says you can 'choose' how you will be paying the mortgage and affordability is assessed that way;
https://mortgages.hsbc.co.uk/buy-to-let-mortgages-...
Any experience with the above type situation Sarnie?
Dominicc01 said:
Jersey Home Loans - a subsidiary of what used to be Kent Reliance. Been with them variously since 2007, although the most recent BTL mortgages were taken in 2011. Been looking recently at another property, and the only thing that seems to matter for lending purposes is that the loans are less than the relevant proportion of MV or rental income multiple. Our personal income doesn't come into it.
When we last obtained a mortgage on our own house (also in 2011), we were up to around 4.75x income.
Even Kent reliance have minimum income requirements;When we last obtained a mortgage on our own house (also in 2011), we were up to around 4.75x income.
http://www.kentreliancebrokers.com/criteria/criter...
As do Santander, Natwest, BM Solutions, Skipton BS to name just a few off the top of my head....
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