Hi guys,

Really hoping someone can help me here, as been baffling me for a while! I own one BTL, which is just about to be rented out. However, the flat I live in myself is rented - I don't own it. I have a 10% deposit now for my own house and I went to see a mortgage broker a few weeks ago and he told me that due to having the BTL, it restricts the number of lenders who will lend to me, as this is existing borrowing and makes me a greater liability. If I'd have known this when I bought the BTL, I definitely would have thought twice! I guess this is quite an unusual case - I bought the BTL as my savings weren't making much in the bank and I didn't really have a base, having moved around for jobs quite a lot.

Can anyone confirm or deny whether this is the case and it will be harder for me to get a resi mortgage?

Thanks

Heidi

Hi Heidi & welcome.

We have two very good mortgage brokers here ... Lisa Orme and Kevin Wright and I will alert them to this thread and ask them to advise.

In property it is so important to get the right advice from the right people ... so their input will clarify this issue.

It is neither completely true or completely untrue, Heidi, it is about how the underwriters of different lenders perceive the risk of you owning a BTL, and they perceive it differently.

The broker is correct, it restricts rather than prohibits

The nub of the issue is that, by owning a BTL, you create a risk that would not be there if you didn't own it. Namely, whenever you suffer a rental void it puts pressure on your main income to make the mortgage payment to your BTL lender.

It is beyond dispute that, if you do not receive rental income in any given month, you must find another source of income to make that months mortgage payment.

The question is how do main res underwriters react to that risk; the answer is that they will assess it differently. In the main, they will most likely choose one of these options
1. they will assess your income as if you had to pay both mortgages from it
2. they will decline to lend to you because of your BTL mortgage in the background
3. if your BTL property is self financing, they will ignore it
4. they will impose a minimum income tier that you must earn before they will lend to you

Will it be harder for you to get a resi mortgage? Perhaps but most people have some aspect in their circumstances that restricts them from being lent to by every lender in the market.

For example, the fact that you only have a 10% deposit will rule out a swathe of lenders whose max ltv mortgage is lower than 90%

It is not unusual at all, it potentially affects every investor getting a main res mortgage but other factors in their circumstances determine how relevant it is. e.g if you only want a 50% mortgage, it is much less relevant

Your broker should take all the factors into account before finding a lender that would lend to you; the size of your deposit, your income, your employment status, your credit history, any o/s debts to name but a few.

I wouldn't get stressed about it. If you are unable to get a mortgage currently, your BTL is unlikely to be the defining reason for that.

Hope that helps

If you had more than 10% deposit I wouldn't be concerned at all to be honest. But given the lenders at 90% LTV are so limited then that limits your options further. That beng said assumng everything else is acceptable it should be doable.

Lisa
http://www.keys-mortgages.com

(09-07-2012 11:06 PM)Lisa Orme Wrote:  If you had more than 10% deposit I wouldn't be concerned at all to be honest. But given the lenders at 90% LTV are so limited then that limits your options further. That beng said assumng everything else is acceptable it should be doable.

Lisa
http://www.keys-mortgages.com

This might be an uninformed response but if you have a lender who has genuine concerns over paying the BTL mortgage and also the residential in the event of a void on the BTL; but what about a RGI policy that covers £50000 including legal costs per claim at £89 per year.
If the lender was shown that RGI policy and assured that only tenants who passed an RGI check and would then have an RGI policy on them, would be taken on.; surely this would allay any concerns a lender would have.
They are reasonable concerns and if it was me I would have no issue in confirming to a lender that I would always have an active RGI policy on the tenant at the property and for any future properties I might rent out.
Surely lenders would take into account RGI coverto adress their genuine affordability concerns!?

No they pay no attention to an RGI at all Paul and rightly so; most of them don't pay out!!!

Lisa

FWIW, this is what I experienced about 3 months ago when we were looking to remortgage our home:

• HSBC will assume that your personal income has to cover 50% of your BTL mortgage outgoings, so that will reduce the amount they'll lend you.
• First Direct won't look at anyone with a BTL mortgage at all.
• As far as I can remember, Santander didn't mind the existing BTLs as long as they were self-funding (but objected to the borrowings being used to fund further BTLs)
• Nottingham BS were fine and we ended up going with them.

We were only looking for 60% LTV, though, so your choices will be more limited. Is there any possibility of you renting a smaller place, or even a room in a shared house, to enable you to save up a 20% deposit fairly quickly?

Abbey/Santander have a maximum of 4 properties in the background.

Plenty of other lenders have no issues or limits subject to various criteria that's too long winded to list here but one buy to let should not be an issue as I say.

Lisa
http://www.keys-mortgages.com

(10-07-2012 09:15 AM)Lisa Orme Wrote:  No they pay no attention to an RGI at all Paul and rightly so; most of them don't pay out!!!

Lisa

Yes I suppose it depends on which RGI company you use.
So I can see how lenders won't take this into account.
Perhaps if a lender could be persuaded by the RGI company talking to the lender to convince them as to the efficacy of the RGI company the LL would use.
Would lenders' underwriters consider this?