Mortgage advice - buying 2nd house w/1st house on a BTL

[ghibbett]

Hello All,

I would much appreciate any advice that could be shared regarding my situation and forthcoming plans.

The situation
I am currently 5 weeks from the end of a 2yr contract whereby I've been working abroad with my UK house (house A) rented out. We're planning on initially moving back into said house. I expect that we'll live there for the next 6 months or so.

The plan
At some point later in the year we'll be looking at buying another house (house B) and, in doing so, move up the ladder with a bigger property. However we do not wish to sell house A as it's a great little property for rental income.

The numbers
On house A we've been overpaying since the start of the mortgage and now have in the region of 30% equity. The plan is to not touch this money.
For house B we have a 20% deposit.

The questions
1. We plan on changing over the mortgage on house A to a Buy-to-Let mortgage (once we've moved out and rented it again, obviously). Is only having 30% equity going to be enough?
2. How is the UK mortgage market looking these days regarding LTV ratios. Is 20% going to be enough?

I appreciate my questions are somewhat open ended (you'll always be able to get a mortgage w/20% deposit, but it may be £££££/mnth) but would appreciate the views of those who are far more enlightened than myself. So everyone on PH then.

Cheers!

[scotal]

ghibbett said:

1. We plan on changing over the mortgage on house A to a Buy-to-Let mortgage (once we've moved out and rented it again, obviously). Is only having 30% equity going to be enough?

In a word, yes. 70% LTV BTl isn't uncommon. The rates aren't great and you have to watch the fees, but apart from that you'll be ok.
Big question on BTl:-

1. Whats the valuation like? i.e does the surveyor think its worth the same as you do.
2. How much rental income will it generate (BTL is primarily based on this.)
3. Will you and/or yur other half be earning enough to qualify for the BTL. Most Btl's have a minimum income stipulation.

ghibbett said:

2. How is the UK mortgage market looking these days regarding LTV ratios. Is 20% going to be enough?

Yes it'll be fine, however again the rates won't be the best.

Have you got work lined up for when you come home?
Will it be more contracting? Will it be perm?
Fixed term contracts tend to worry lender's. Self employed applicants need to show a track record, which having been abroad I doubt you can?
Perm jobs will present no problem, provided the numbers add up.

ETA, have you kepy UK Bnak accounts open whilst you've been away? If not you need to have opened them and start rebuilding a visible credit history. Same with UK based Credit cards
Get yourselves back on the Electoral role the minute you can.
ETFAS have you taken Stamp duty into account with that 20% equity?

Edited by scotal on Monday 27th February 11:35

[ghibbett]

Firstly, thanks for replying so quickly!!

scotal said:

ghibbett said:

1. We plan on changing over the mortgage on house A to a Buy-to-Let mortgage (once we've moved out and rented it again, obviously). Is only having 30% equity going to be enough?

In a word, yes. 70% LTV BTl isn't uncommon. The rates aren't great and you have to watch the fees, but apart from that you'll be ok.
Big question on BTl:-

1. Whats the valuation like? i.e does the surveyor think its worth the same as you do.

This is not yet confirmed. The majority of my 70% calculation is based on the overpayments made during the last 7 years rather than any great appreciation in value of the property. Therefore the 70% is a ball-park figure at this stage.

scotal said:

2. How much rental income will it generate (BTL is primarily based on this.)

Currently renting at £725/mnth. Mortgage remaining is around £120-£125k and I'm at the ripe old age of 32, therefore either a 25 or 30yr mortgage.

scotal said:

3. Will you and/or yur other half be earning enough to qualify for the BTL. Most Btl's have a minimum income stipulation.

Obviously this is a bridge we'll come to once we know the stipulated minimum value, however we'll confortable be able to cover both mortgages. The proof will be in the numbers!

scotal said:

ghibbett said:

2. How is the UK mortgage market looking these days regarding LTV ratios. Is 20% going to be enough?

Yes it'll be fine, however again the rates won't be the best.

Have you got work lined up for when you come home?

Yes. I run a small Ltd Co and have a contract that runs until 2014.

scotal said:

Self employed applicants need to show a track record, which having been abroad I doubt you can?

Yes I can show this as my contract was with a UK company with all financials being paid in sterling. As such I've kept UK bank accounts for both the business and personal. The business has still been operating out of the UK, however as an employee I have been working abroad.

scotal said:

ETFAS have you taken Stamp duty into account with that 20% equity?

Yep.

Cheers again

Edited by scotal on Monday 27th February 11:35

[scotal]

From what you've said there you should have no problems doing what you want to.
Just a question of making the numbers fit.


ETA And explaining the gap in your residency, again easily doen by the sound of things.

[ghibbett]

Cheers Scotal