How much BTL mortgage could I reasonably expect to get?(9 Posts)
I've been trying to sell my London flat and buy a house in a new area for about 9 months now. Ive almost lost my mind with the rollercoaster of buyers pulling out (nothing wrong with the flat, their circumstances changed etc) and the knock on effect this has had on my onward purchase.
It's all just fallen through once again so I am considering giving up and renting my place (London) out.
We still want to move out of London, so I'm thinking about buying a much smaller place in my new area sitting still for a year or 2/3/4 then selling our flat and then trying to upsize in the new area. Our total budget should buy us a decent house in the new area (4 bedroom detached big garden in nice area) so budget isn't the issue. It's aligning our sale with our purchase. And finding somewhere to purchase - while our budget is fine there aren't that many of the sort of houses we want around so I don't feel confident selling the London flat and moving into short term rental as we might be there 6 months or more if the right house doesn't come up. We're not that fussy, I'm just going on experience from house hunting over the last 9 months.
So, to my question! Given the below finances, what sort of mortgage might we be able to secure to buy our second property with? I have no idea whether our budget would be 150K or 400K+ and I haven't found any websites which can calculate this sort of thing - links very welcome.
Flat: value ~400K, mortgage outstanding 150K so equity 250K.
Earnings: (joint, 2 people, 4 days pw each) ~110K pa
Savings: 10K (smaller than they were before all the surveys/legal fees we've paid out over the last few months seethe)
Our current mortgage payment is about £850pm (though we're overpaying so pay about £1200 pm) and we could probably get ~£1400pm rent, less management fee etc as we would want to outsource this.
The plan I'm thinking of is switching our current mortgage to be a BTL, then using whatever budget we have available to us to buy a new place.
For info we had no problem getting the finance to buy somewhere for £650 on these figures, so an additional mortgage of £250kish, but no idea how this compares to what we'd get if we were renting our flat out and buying a second property.
Thanks for any advice/links etc.
As a rule of thumb you can get 70% LTV on a BTL, if you want more than that then you are probably going to have to pay a much higher rate of interest (BTLs are already more expensive than residential mortgages).
The other rule of thumb was that rent had to cover 130% of mortgage interest but, since the last budget took away some of the allowances and will make the tax relief potentially less generous, lenders may be looking at a higher percentage. But all things considered, you should be able to borrow about £280k or an extra £130k above your current mortgage - you would then have to find an extra £120K on your new residential mortgage to reach your ideal budget. Having a BTL never used to count against you when getting a residential mortgage, again, I don't know if that may have changed.
I would speak to a mortgage broker who will give you much more detail. London & Country consistently score well. Fwiw, once you have paid arrangement fees etc, you might find it makes sense to keep hold of the BTL property for more than a couple of years so I would look at it as a medium- rather than short-term option.
I did this last year. I really recommend using an advisor. I used Helena heal. She sourced the best mortgages and did a lot of the donkey work. One thing to check, you would have to pay capital gains tax on all the increase in value of your flat if you sell more than one year after renting it.
With respect, you don't have to pay CGT on all the uplift if the property has been your principle residence for any amount of time. See my post on this thread for some (very basic) guidance.
Thanks for the replies. Lala I'll have a good read, but TBH I'd be inclined to not worry too much about the CGT gain- so long as the flat pays for itself I'll be fine cashing in in a few years. It's just the bloody impossibility of selling and buying 100 miles away at the same time that I can't cope with.
Try the calculators here www.moneysavingexpert.com/mortgages/mortgage-rate-calculator
I understood the max was 75% LTV on a buy to let (minimum 25% deposit) and 125% of your rental income but lenders may well be stricter than that now so maybe it is more like 130%.
Management fees from agents are ridiculous. Research your local agents but you could be looking at £200-£300 per month. (I'm going by a friend of mine who pays £300 per month on a flat she rents out for £1600)
On the basis that your rental income of £1400 would drop to £1100 if you paid £300 in management fees, this would drop the amount you could borrow from £270,000 to £210,000... I would look at an alternative like a friend who lives locally and pay them to manage it instead...
I used this calculator for these figures mortgageadvisers.which.co.uk/buy-to-let-calculator/
So let's say you get a cheap deal on the management and can borrow £250,000 against your flat via a buy to let. You then need to pay back your £150,000 current mortgage. This gives you £100,000 as your deposit for the residential place.
On your combined income you could comfortably borrow £270,000, which on a 25yr mortgage at 2.5% would be around the £1200 a month repayments that you currently pay.
So, using the £10k savings you have for stamp duty and fees you should have an approx budget of £360k - £370k for your residential property....
Hopefully I've got those calculations correct! You might want to check them using those calculators...
Obviously check all this with a good broker!!! I recommend James Mclaughlin at Positive Solutions...
The tax on BTL incomes are changing.
It looks like one or both or you a high rate tax payers. You will find running a BTL costs you a lot of money.
You will struggle to increase your total mortgage debt to 400K.
I'd also recommend talking to a broker. We had a relatively straightforward similar situation (but weren't releasing equity from our existing oroperty) and initially tried to go straight to lender for mortgage on new property and was turned down. Found an excellent broker and he sorted everything out within a week, with the threat of our vendors pulling out hanging over us. Happy to recommend him if you pm me.
even using an agent, or maybe especially using an agent, BTL is alot of hassle and you need alot of different skills and to keep rigth on top of everything.
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