Buying Together

Posted on 28 March 2011 by Jo


I own a 1 bed flat which if sold would achieve at most £135k. There is an outstanding mortgage on an interest only basis of £116k on 5% SVR.  This is rented on a consent to let basis and achieves a rental income of £595 per month. I lived in it for 1.5 years and it has been rented out for the last 4.

My partner owns a 1 bed property currently valued at £265k with an outstanding mortgage of £175k. Repayment SVR at 5%.  He could achieve a rental income of approx £1250 per month. He currently lives in this property.

We have seen a property we would like to buy together which is valued at £525k and requires circa £75k worth of work to bring it up to a value of circa £700k.

We have together, not including any potential equity in our existing properties, £75k saved.  How would we approach this together?  Would we each have to remortgage our individually owned properties to buy to let and what impact would that have on our application for a 3rd joint mortgage.

Jo

I do not believe it would be necessary for both of you to remortgage your existing properties on to Buy to Let (BTL) mortgages.  As you have got consent to let, there are Lenders who will accept this and as long as your rental income satisfies their criteria they will ignore your current mortgage payments when calculating what you can afford to borrow.  With regards to your partner he will need to either get consent to let or remortgage.

As a general rule if the rental income cover 125% of your current mortgage payments then Lenders will ignore these debts and treat your new mortgage application on it's own merits and I would expect you to be able to borrow around £490,000.  This may not leave you enough savings to pay Stamp Duty, legal costs, supply the deposit and carry out repairs and I think you will need to look at capital raising on your partner's property.  On a rough calculation I think you could raise another £25,000 by remortgaging on to a BTL and borrowing the maximum possible against the property's value and anticipated rental income.

I believe you would benefit from speaking to one of our independent mortgage advisers. Please call on 0344 346 3672 and tell the consultant the date and title of your question. They will be able to look at your situation and advise you accordingly.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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