Rental income for mortgage

[cadburygorilla]

I own my home outright (mortgage paid off after inheritence). I’d like to buy a bigger home but keep my current one as income. I have health issues so rental income would mean that in time, when I’m older, that I could manage less hours at work but not require Government benefits. I’ve spoken to an independent mortgage advisor, and while I could afford the repayments comfortably between my salary and rental income, however they won’t accept rental income as income for the affordability checks. I understand why, as it’s not guaranteed, but nor is my salary, I could lose my job tomorrow?!

I’m feeling rather frustrated because I know that I could pay but they won’t accept it for the income calculation. Does anyone have any experience of this and have any tips please?

When I looked into this years ago, it was also
a no from the building society. They did say if we had years of renting the property out and could prove steady income it works be different. I’m aware this is a bit catch 22. Having been a landlord for 13 years now I can kind of see their point- things occasionally go catastrophically wrong with renting out property and a bad tenant can wipe out a years rental income.

Any tips ?
Yes look on the many threads on MN about why so many landlords are selling their rental properties now as Government intervention and falling property prices mean the figures don’t work any more.
That’s before you get a none paying tenant.

For me it’s about the long game. I’m doing remarkably well to be working full time in a highly respected job with the health issues I’ve got. However, this house (whether that’s rental or having to sell it in years if my health fails me) is a back up plan for that.

It won’t be enough to live on. We own a flat in London which is mortgage-free. We make about £7k per year after tax and maintenance. Partly that is because we pay a lot of tax, but it is also because you just don’t make a lot of money on a single rented property.

Can you raise a mortgage on your current property and then buy the rental outright? Won’t be as good for tax purposes but possibly a way around your problem.

I would echo previous posters, both about the new RRB, and also whether you could afford to have a non-paying tenant.

The most obvious answer is to sell the house and invest the proceeds for income. Far less risk (so long as you learn about investing first and diversify properly - stocks, bonds, cash and precious metals). It will return far more than rent, will have few if any legal issues and it won't call you in the middle of the night to fix a boiler.