Mortgage question

[dba7108]

Any mortgage guys on here please..

Myself and my wife have a house that's worth 400k and 2 rental flats worth approx 150k each generating 1625 a month in rent.

All properties are owned outright.

We are looking at a newbuild house thats around £750k.
Would a lender take into account equity within the flats and use this as some form of calatoral or guarantee?
I'd ideally only want to sell the 400k house so I need a mortgage for 250k. We have 100k of saving so would put that down.
I know it's how long is a piece of string question but is this anyway doable?
Thanks

[HughT4]

i'm a broker. if you have employed/self employed income of c.£60k you should be able to secure new residential mortgage of approx £250k. Some lenders will take your taxable rental profit (after letting costs) from the 2 x BTL's as part of that c.£60k income.

if you have no other income apart from the rental profit, you could potentially remortgage each BTL up to 75% of its value, which would release an extra c.£112500 from each property which would then produce c.£225000 total which you could then put down as additional deposit on the new residential - so with that would then have approx £725000 (£400k + £100k + £112.5k + £112.5k) of the £750000 needed.

In short, if you have other employed/self employed income on top of the rental, its definitely doable - assuming no other major debts (car finance/CSA etc), and that you are under c.50 years old - generally the shorter the mortgage term, the lower the income multiple, so for example, over 60's will get lower loan size on income than a 45 year old.
if you only have the rental, it'll be tight, but may not be impossible.


good luck with it.

[Sarnie]

dba7108 said:

We are looking at a newbuild house thats around £750k.
Would a lender take into account equity within the flats and use this as some form of calatoral or guarantee?
I'd ideally only want to sell the 400k house so I need a mortgage for 250k. We have 100k of saving so would put that down.

I might be missing something here but why would you need a lender to take the BTL's as any form of guarantee?

Are you concerned about not being able to secure the £250k lending?

[dba7108]

My wife earns approx £22k but it's seasonal so only 8 months of the year. I'm newly self employed. Would I be better to get a normal salaried job to secure a mortgage? Thanks for detailed replies above.

[HughT4]

dba7108 said:

My wife earns approx £22k but it's seasonal so only 8 months of the year. I'm newly self employed. Would I be better to get a normal salaried job to secure a mortgage? Thanks for detailed replies above.

in reality a residential won't use your income if newly self employed. your wifes income will probably only get you around £50k/£60k loan (as her income is then supporting you are your income is not used for mortgage affordability).
You'd be better off doing a BTL remortgage on both your BTLs - assuming standard properties and normal AST's you should be able to capital raise 75% ltv on both - from lenders who will be happy with your personal income situation.
that should get you c.£225k from both the BTL's.
you may then need to take a small residential of c.£25k for the shortfall which should be possible based on your wifes earnings.
in 2 years once you have 2 years accounts/self assessments you may then be able to remortgage the residential, capital riase and repay one or both BTL's.

one other possibility - you may be able to use the rental profit towards the new residential affordability if you have had a decent profit from both BTL's for at least 2 years - some lenders will then class you as a professional landlord.

assuming your credit score is good, in theory it should be doable. just make sure if you go to a broker they are experienced in BTLs as some of posts i see on a broker forum i'm on makes me doubt the industry...but i suppose everyone starts somewhere..
Rates on BTL and residential are broadly very similar - BTL probably slightly higher given the 75% ltv you'll need to draw max loan out.

(no personal advice given here - just an outline of what i'd do if in your situation).

[Sarnie]

dba7108 said:

My wife earns approx £22k but it's seasonal so only 8 months of the year. I'm newly self employed. Would I be better to get a normal salaried job to secure a mortgage? Thanks for detailed replies above.

Just use the income from the BTL's in addition to your Wife's income...........or mortgage them to increase your deposit if you are falling short