What's the state of the market with these at the moment? I'm looking to move out of the house I share with ex and kids and get a place I can live in, maybe do up a bit, and rent out spare rooms. I've a flexible mortgage on the existing house so could raise say £50K deposit from that. I'm a self-employed tradesperson, my last year's income was £24K, ex's about £4.4K, total mortgage on main house c. £200K of which c. £100K is savings account (so c. £100K actual mortgage outstanding) and house value I'd guess about £300K - £350K.
So ... am I in with a chance of borrowing anything? How much - what sort of multiplier? What lenders to go for? What sort of 'product' to ask for ... all help appreciated.
What you're proposing doesn't fit what "buy to let" mortgages are for. The lenders expect you to rent out the whole property, not just spare rooms. Unlike normal mortgages, BTLs don't go on income multipliers, they go on affordability. They want to see the expected rental income covering typically about 150% of the mortgage payments or more.
You're basically wanting to buy a second property, and I reckon that unless your ex gets a job which is rather more than just very part-time, and can fund the entire existing house's payments, you're pretty well stuck.
Of course I suppose you could pretend it's BTL and not tell the lender you expect to move into the new place. But even then you'd have to get the sums to add up. Ask yourself how likely it is that your combined income plus what you realistically expect from lodgers will fund your total mortgage commitments and living costs.
If you reckon you can cover the loan, one option is that you simply remortgage the existing house without getting an additional mortgage on the new property, provided the new property is going to be inexpensive enough. Your old lender might let you remortgage to 80% of value (and if it's a joint mortgage the ex will need to agree - but getting you to move out will be the sweetener), i.e. to £240k to £280k, so that would give you £140k to £180k with which to buy the new place (but your savings would be gone). Then you could perhaps get a BTL as well, covering no more than 50% of the cost. Say you bought a £200k place funded £100k from BTL and £100k from your savings, that would leave you with £40k-£80k spare withdrawable equity with which to fund doing-up costs.
I think you will need to answer a few more questions before we could give you any advice. The first is are you looking to keep your existing propetry? If so are you looking to try and come of your original mortgage and leave just your ex?
Also you suggest you could take out 50k as a deposit what purchase price are you looking to pay for the new property? Aslo for tax purposes you may struggle with owning and living in both. As if you lived in the new property you should thn change your existing mortgage to a BTL and then once that prop is sold you will pay Capital gains tax on the profits made!
So to sum up do you want to kleave mort in place how much are you looking to lend and do you have proof of 2 years income from audited accounts?
if he wants to let all or part of the (new) house and deduct the mortgage costs before tax, doen't the loan have to be secured on the house that is being let?
Starting with the low-hanging fruit: yes I have audited accounts for the last 6 or so years. Although last year's £24K was the best year: the previous two year's were around £13.5K.
yes, for the immediate future
That would be ideal from the point of view of separating our finances, but would the lender let her carry the mortgage on her own, given her low income?
That would depend on what I could borrow, but it looks as if I'll have to pay around the £200K mark.
I'm not sure I understand that. If I live in the new property, and change the existing mortgage to a BTL (why would I do that? the existing property won't be being let) then, when selling the existing place I'm liable for CGT - sounds like a reason not to make that change.
No, for the loan interest to be an allowable expense against letting income (for tax purposes) it is sufficient for the *purpose* of the loan to be in furtherance of the business (such as to buy the property). What, if anything, the loan is secured on is immaterial. One slight problem which needs to be solved, though (it isn't difficult but it needs to be sorted out), is if only part of the loan supports the business. This would be typical in the scenario I suggested. If you had (say) £50k outstanding on an existing "normal" mortgage and you borrow an additional £100k, then only interest on the £100k part qualifies, interest on the £50k part does not.
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