2nd mortgage advice?


A

atka1

Hi,
I currently live in Berkshire but am thinking of reloctaing due to
work to Scotland. I would like if possible to rent out my place and
maybe in time buy up in Scotland, but I'm not sure how best to go
about it. What kind of mortgage should I get for my place in
Berkshire, do I just fix for a 25 year period, do I go buy to let (if
so how), can I use my first property to use as collerateral for a 2nd
mortgage? Suppose I was to get a job in Scotland for 30k, how big a
mortgage could I get up there, would it be limited to x times my
salary, or would the fact that I have a place in Berkshire allow me to
take out a bigger mortgage that would otherwise be possible? Is it
better to just let out my rooms, or should I rent out the property to
companies? I live in Windsor so I'm close to the rececourse, 30 mins
fromHeathrow etc?
Any help much appreciated. I can't see any other suitable UK
newsgroups for home owners, mortgages etc any suggestions for other
postings?
 
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D

Doug Ramage

Hi,
I currently live in Berkshire but am thinking of reloctaing due to
work to Scotland. I would like if possible to rent out my place and
maybe in time buy up in Scotland, but I'm not sure how best to go
about it. What kind of mortgage should I get for my place in
Berkshire, do I just fix for a 25 year period, do I go buy to let (if
so how), can I use my first property to use as collerateral for a 2nd
mortgage? Suppose I was to get a job in Scotland for 30k, how big a
mortgage could I get up there, would it be limited to x times my
salary, or would the fact that I have a place in Berkshire allow me to
take out a bigger mortgage that would otherwise be possible? Is it
better to just let out my rooms, or should I rent out the property to
companies? I live in Windsor so I'm close to the rececourse, 30 mins
fromHeathrow etc?
Any help much appreciated. I can't see any other suitable UK
newsgroups for home owners, mortgages etc any suggestions for other
postings?
A lot will depend whether you want/have to go the status or non-status
route.

For status (employed), most lenders are unlikely to exceed 4x salary, and up
to 95% LTV. There may be some who will go to 100% ( and even 125%) LTV, but
you may be restricted on interest rates etc., and some will do higher
multiples.

No-status lenders are unlikely to exceed 85% LTV (with reasonable interest
rates) - income is not requested or not verified - 90% LTV can be done at
higher rates and redemption penalties.

A good mortgage broker should be able to assist - check if any fee is
payable ( the more difficult the case, the higher the fee is likely to be).
Note the maximum fee is limited to £5, if you do not take up the mortgage
offer.
 
A

atka1

Silly questions no doubt, but being a newbie here, say my current
mortgage is 150k and the value of the property is 200k. If I move up
north my salary would probably not cover 150k, but could I still get a
mortgage down south based on the value of the house (or say 85% of the
current estimation of 200k)? What I would like to do is rent it out so
that it covers the cost, rent up north for a while, and then in future
buy up north. So:

a) Could I take out a buy to let mortgage based on the value of 200k
(possibly take out some equity to help me up north)?

b) Having rented for a while up north, can I use the fact that I have
a house down south to help me get a mortgage up north (or will I just
have to get a mortgage based on x times my salary) and ignore the fact
that i have another house? In building up a property portfolio I
thought you could use collerateral of one property to assist in
purchasing another?

c) I would probably prefer to rent the 2 bedroom flat down south to a
company rather than by room. Any advice there?

Thanks
 
L

Laura Phillips

What I did was change the mortgage on what was my current house to a buy to
let for the remaining mortgage term. Then I got a new mortgage on a 'let to
buy' mortgage (letting house already owned to buy second house) for a
suitable term for me. If your current provider can't change to buy to let
try some others, they're usually willing to talk.

'Legally' you need to hav a buy to let mortgage on your Berkshire property
or the tax man's not a happy chappy. When applying for your buy to let
mortgage they generally tend to use the rule of 130% of rental value is what
you're allowed as a value for the mortgage. When buying property in
Scotland (and I'm assuming they're the same rules as England as I'm not
sure) you might need to declare your buy to let property, but you should
still be able to get the normal multipliers on the mortgage (3 x main, 2.5 x
main + 1 x second, etc...).

Re. letting to different people - you're best bet is to talk to local
letting agent - they don't have to know if you're not planning to use them,
but I'd advise it if you're going to Scotland - do you really want a phone
call at 3am saying the central heatings packed in and then have to sort
something out for them? Letting agents round where I live tend to charge
10-15% of the rent for doing the work (£15 per £100 of rent coming in). I'd
also advise talking to a few letting agents, they do vary in their services
and charges. Full service agents are the best. Remember to think about
insurance - if the tenant doesn't pay, does a bunk, leaves the place a tip,
etc., and you're losing rent because of it you can get it paid on the
insurance policy. The one I do is £10 a month, and it works. Renting to
companies - unless there's events going on every week of the year it could
be limited on times to rent out.

Hope this helps.

Laura.
 
T

Tumbleweed

Laura Phillips said:
What I did was change the mortgage on what was my current house to a buy to
let for the remaining mortgage term. Then I got a new mortgage on a 'let to
buy' mortgage (letting house already owned to buy second house) for a
suitable term for me. If your current provider can't change to buy to let
try some others, they're usually willing to talk.

'Legally' you need to hav a buy to let mortgage on your Berkshire property
or the tax man's not a happy chappy.
Dont you mean the mortgage co? why would the tax man care what the rate of
interest on your mortgage is?
 
D

Doug Ramage

Tumbleweed said:
'let

Dont you mean the mortgage co? why would the tax man care what the rate of
interest on your mortgage is?
The IR are not concerned with your mortgage lender, only on the
deductibility of the interest.
 
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L

Laura Phillips

Tax man not happy cos he wants you to declare income on tax return so he can
take more money from you - nothing to do with your interest rates, just his
way of getting extra tax.
 
D

Doug Ramage

So why should the IR insist you have a BTL mortgage, rather than an
"ordinary" mortgage?
--
Doug Ramage

Laura Phillips said:
Tax man not happy cos he wants you to declare income on tax return so he can
take more money from you - nothing to do with your interest rates, just his
way of getting extra tax.
 
A

atka1

Thanks for this. Re the 130% rule, over how many hears is that? Are
you saying, for example if I was to get 1500 pm (I know that's
probably not realistic but however), over how many years is that? What
do you mean by 130% of the rental value? I just want ot know what the
overall figure would be (and whether or not I could take out some
equity)?
Thanks
 
T

Tim

What I did was change the mortgage on what was my current house to a buy to
let for the remaining mortgage term. Then I got a new mortgage on a 'let to
buy' mortgage (letting house already owned to buy second house)
Does that mean that you tell Lender1 "the rent on house1 will cover the BTL
mortgage" - and also tell Lender2 "the rent on house1 will cover the LTB
mortgage"?? :)
'Legally' you need to hav a buy to let mortgage on your Berkshire property
or the tax man's not a happy chappy.
Is this really true? Which law is broken?
When applying for your buy to let
mortgage they generally tend to use the rule of 130% of rental value is what
you're allowed as a value for the mortgage.
Please excuse my ignorance - what is "rental value"? - does this mean:
(1) If the value of house (to an owner who rents it out) is £150,000, then
you can get a mortgage for £195,000 (seems generous!) ?
(2) If rent is £10,000 per year, can only borrow £13,000 mortgage (I can't
see it being this one!)
(3) Something else?
 
R

Ronald Raygun

Thanks for this. Re the 130% rule, over how many hears is that? Are
you saying, for example if I was to get 1500 pm (I know that's
probably not realistic but however), over how many years is that? What
do you mean by 130% of the rental value? I just want ot know what the
overall figure would be (and whether or not I could take out some
equity)?
It isn't "over so many years". It means that if the mortgage payments
(or possibly just the interest) are £500pm then the anticipated likely
rent (as confirmed by a local letting agent) should be at least £650pm.
It's just to make the lender worry less about the borrower not making
enough money to keep up the payments.

You might think 100% would be enough, but they inflate it to allow for
gaps in rental income, and for other expenses.
 
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T

Tumbleweed

Laura Phillips said:
Tax man not happy cos he wants you to declare income on tax return so he can
take more money from you - nothing to do with your interest rates, just his
way of getting extra tax.
Whether you declare income has got nothing to do with your type of mortgage!
Its got to do with whether you declare income.
 
T

Tumbleweed

Tim said:
'let

Does that mean that you tell Lender1 "the rent on house1 will cover the BTL
mortgage" - and also tell Lender2 "the rent on house1 will cover the LTB
mortgage"?? :)


Is this really true? Which law is broken?
No, its bollocks.
 
R

Ronald Raygun

Tumbleweed said:
No, its bollocks.
The bit about the taxman is indeed wrong, but technically you
are doing something "illegal" by not converting the ordinary
mortgage to BTL (or alternatively obtaining the lender's
permission to let). This is not criminally "illegal", but it
is something which could result in the lender taking legal action
against you for violating the terms of the ordinary mortgage
loan agreement, wherein the borrower has agreed to use the
property for not other purpose than as a home for himself
and his family.
 
D

Doug Ramage

Ronald Raygun said:
The bit about the taxman is indeed wrong, but technically you
are doing something "illegal" by not converting the ordinary
mortgage to BTL (or alternatively obtaining the lender's
permission to let). This is not criminally "illegal", but it
is something which could result in the lender taking legal action
against you for violating the terms of the ordinary mortgage
loan agreement, wherein the borrower has agreed to use the
property for not other purpose than as a home for himself
and his family.
Although possibly technically true, a few lenders have told me "off the
record" that would rather *not* know that a tenancy had been created, as
that might restrict their repossession options.
 
T

Tim

It isn't "over so many years". It means that if the mortgage payments
(or possibly just the interest) are £500pm then the anticipated likely
rent (as confirmed by a local letting agent) should be at least £650pm.
I understand that one - which could be written as "130% of mortgage interest
must be covered by the rent".

*However*, Laura said: "130% of rental value is what you're allowed as a
value for the mortgage" - this seems to indicate something different
entirely!!!
 
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T

Tim

The bit about the taxman is indeed wrong, but technically you
are doing something "illegal" by not converting the ordinary
mortgage to BTL (or alternatively obtaining the lender's
permission to let).
EXACTLY! (your bit in parentheses) - you should *not* "need to have a buy
to let mortgage" - just make sure it's OK with the original lender.
 
R

Ronald Raygun

Tim said:
EXACTLY! (your bit in parentheses) - you should *not* "need to have a
buy to let mortgage" - just make sure it's OK with the original lender.
But that's pretty well the same thing. Typically a lender giving
permission to let would in return expect to beef up the interest rate
to the same as that they would apply to their BTL product if they have
one, and make the conditions the same. Even if they don't have one,
they'll probably end up bumping the rate up by half a percent or so.
 
R

Ronald Raygun

Tim said:
I understand that one - which could be written as "130% of mortgage
interest must be covered by the rent".

*However*, Laura said: "130% of rental value is what you're allowed as a
value for the mortgage" - this seems to indicate something different
entirely!!!
No doubt she will tell us if so, but I suspect she's just jumbled
up a few key words and phrases, because they don't really make sense
verbatim.
 
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A

Andy

Although possibly technically true, a few lenders have told me "off the
record" that would rather *not* know that a tenancy had been created, as
that might restrict their repossession options.
I had the same from an employee of the bank I use. When I remortgaged to
get a better rate (No equity withdrawal) I told her that we were going to
rent it out and that they would be DSS.

Her only question was would the remortgage be done before we moved out and
if so she was happy.

The first house I own was and still is on a normal Halifax mortgage. About
10 years ago they complained that I should have asked permission first. As
the house was in major negative equity I gave them the option of carrying
on as before (with no missed payments for 6 years) or sending them the keys
in the post. They kindly decided to let me carry on and charged me nothing
extra :)

The IR when I was invesitigated 10 years ago were cross with me for not
declaring my rental income and fined me for this (foolish youth) but were
not even slightly interested as to where or what sort of mortgage I had.

Andy
 

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