Contractor mortgages and stuff

[psychocandy]

Have never tried to get a mortgage as a contractor but well aware that its not so easy from traditional lenders anyway. But wifes got an idea in her head which I'm not sure will work for a normal permie!

Current mortgage outstanding - about £130K. Wife wants to move, buy a new house, but keep the old one and rent it out. In effect, get a new mortgage for the new house.

Not even sure if I can get a mortgage for 2 houses. (Although, I am in Wales - 5 bed detached for under £400K - sorry for all you lot in the south east).

But, is the original lender even going to allow this? I always thought you had to get a buy-to-let mortgage if you were going to do this?

Or could you port exiting mortgage to new house, add a bit on and then get buy-to-let for the old one?

[Nathan SJD Accountancy]

Hi,

I know I haven't answered your questions as I do not know.

But... Contractor Mortgages ...maybe a good place to start to know if it is possible etc.

I am sure they will be more than happy to discuss and address any other questions with you.

[northernladuk]

Am in a similar situation with us looking at a new one but want to keep the old property. Problem we have is the BTL LTV is really poor. To stay with our existing lender they want a 30% deposit which can go up to 40% if we look around. That is nearly all our equity so means having to get a pretty crap rate on the new house and getting mortgaged up to the eyeballs again which we don't fancy doing.

Some lenders may allow you to let your house under your existing product and then you just tell the new lender it is BTL and they will ignore it from the new mortgage calcs. You may have to produce evidence you have approval though so just winging it and telling them you have authority when you don't could catch you out. You will have to do this well in advance of getting a new one though as it makes you a bigger risk.

The options our lender gave was to port the existing mortgage to the new one, take a top up mortgage to make up the difference (current rate is pretty good) and then take a BTL on the existing house.

All in all it isn't looking promising tbh so we are likely not to bother with keeping ours. I have only declared my income to them not my rate so could probably borrow more if I went to a contractor specialist but I am unwilling to go that far TBH. Am too old to be mortgaged up to the hilt now.

One thing to consider though, it always seems attractive to keep the old one to let but you have to be really pragmatic and ask yourself if it is really the best house to let out. It is too easy to be emotionally attached and not make the best decision. The rent to value of our 4 bed detached is not as good as a smaller house catering for single parent or young couple so we will probably get settled first and then look for something more suited to that to make more profit per month (not long term of course) and less time empty. With a pure business head on our house isn't the best option.

[psychocandy]

Am in a similar situation with us looking at a new one but want to keep the old property. Problem we have is the BTL LTV is really poor. To stay with our existing lender they want a 30% deposit which can go up to 40% if we look around. That is nearly all our equity so means having to get a pretty crap rate on the new house and getting mortgaged up to the eyeballs again which we don't fancy doing.

Some lenders may allow you to let your house under your existing product and then you just tell the new lender it is BTL and they will ignore it from the new mortgage calcs. You may have to produce evidence you have approval though so just winging it and telling them you have authority when you don't could catch you out. You will have to do this well in advance of getting a new one though as it makes you a bigger risk.

The options our lender gave was to port the existing mortgage to the new one, take a top up mortgage to make up the difference (current rate is pretty good) and then take a BTL on the existing house.

All in all it isn't looking promising tbh so we are likely not to bother with keeping ours. I have only declared my income to them not my rate so could probably borrow more if I went to a contractor specialist but I am unwilling to go that far TBH. Am too old to be mortgaged up to the hilt now.

One thing to consider though, it always seems attractive to keep the old one to let but you have to be really pragmatic and ask yourself if it is really the best house to let out. It is too easy to be emotionally attached and not make the best decision. The rent to value of our 4 bed detached is not as good as a smaller house catering for single parent or young couple so we will probably get settled first and then look for something more suited to that to make more profit per month (not long term of course) and less time empty. With a pure business head on our house isn't the best option.

Yeh. This is what I assumed might happen.

In the lucky position that got tons of equity at the moment but if we 'upgraded' it might not be so cool. LTV is the thing these days as well like you said.

Im not sure about the rent idea also but Mrs is keen for some reason. Not convinced that property and renting out is a good idea at the moment. Also, like you, 4 bed detached is what we got.

Happy new year BTW.

[northernladuk]

Yeh. This is what I assumed might happen.

In the lucky position that got tons of equity at the moment but if we 'upgraded' it might not be so cool. LTV is the thing these days as well like you said.

Im not sure about the rent idea also but Mrs is keen for some reason. Not convinced that property and renting out is a good idea at the moment. Also, like you, 4 bed detached is what we got.

Happy new year BTW.

I still think it is a good idea for the long term for a little extra when we retire but 4 bed is too much for us now. We don't want top rates on mortgages anymore and worrying about 2 big mortgages if the BTL is empty for 2 to 3 months (or more) a time. It has to be something that isn't going to cause sleepless nights and skint us should it not work. Something smaller and spread the investing around just in case is going to be our preferred solution. Sometimes with houses you just gotta cut and run.

3 hours to get to work after a 4 car shunt on the M60 this morning.. Nothing happy about the new year so far but HNY to you as well.

[psychocandy]

I still think it is a good idea for the long term for a little extra when we retire but 4 bed is too much for us now. We don't want top rates on mortgages anymore and worrying about 2 big mortgages if the BTL is empty for 2 to 3 months (or more) a time. It has to be something that isn't going to cause sleepless nights and skint us should it not work. Something smaller and spread the investing around just in case is going to be our preferred solution. Sometimes with houses you just gotta cut and run.

3 hours to get to work after a 4 car shunt on the M60 this morning.. Nothing happy about the new year so far but HNY to you as well.

Yep. Im more wary these days about taking on more financial responsibilities and hassle.

Took me almost 15 mins to get here this am - 9 miles. Could be worse - you could have been part of the 4 car shunt!

[barrydidit]

The trouble with specific BTL products is they're priced higher to reflect additional risk. There isn't really any additional risk from your point of view since your name is on the documentation just the same as it always was.
It would be preferable if you could:
1. Talk to your existing lender and find out whether they will give their 'consent to lease' under the existing T&C's.
2. Some T&C's will permit you to re-drawdown up to the original loan amount. Note, not 'some lenders' but 'some T&C's' - there will be multiple versions in force at any particular time so you will need to read yours carefully.
3. If you can re-drawdown or even remortgage to remove equity from Property A this might be a good source of additional deposit for Property B since it will reduce the LTV on Property B giving you access to better rates, and additionally will increase your loan costs for Property A when you come to complete your tax return.
4. re loan costs, it's only the interest which is an allowable expense, not the capital repayment so it makes further sense (tax-wise) to shift Property A to an interest only loan, and use any saving to pay down additional capital on Property B

You'll pay less tax by reducing the LTV on Property B at the expense of Property A, but you'll need to determine based on the rates whether this is a false economy or not.

Of course, you might find a decent BTL rate out there..... but in my experience the above would be an ideal solution.

HTH

[Freelancer Financials]

John Yerou, Freelancer Financials. How are you getting on with the mortgage? Have you decided on what route to take.

The correct way to do it is contact your existing lender to get 'consent to let' on your existing home, most high street lenders will allow this. For the new property, you have a number of different options. You can apply for a contractor mortgage through a contractor mortgage specialists like ourselves. But equally, you can be assessed on 2 years accounts if your accounts provide sufficient income for the amount you wish to borrow. There are a number of high street lenders that will also take retained profits into account.

A contractor mortgage is based on your contract rate, no accounts, SA302, tax returns required. A copy of your contract along with bank statements is used to certify your affordability.

I hope this helps.

John Yerou

Have never tried to get a mortgage as a contractor but well aware that its not so easy from traditional lenders anyway. But wifes got an idea in her head which I'm not sure will work for a normal permie!

Current mortgage outstanding - about £130K. Wife wants to move, buy a new house, but keep the old one and rent it out. In effect, get a new mortgage for the new house.

Not even sure if I can get a mortgage for 2 houses. (Although, I am in Wales - 5 bed detached for under £400K - sorry for all you lot in the south east).

But, is the original lender even going to allow this? I always thought you had to get a buy-to-let mortgage if you were going to do this?

Or could you port exiting mortgage to new house, add a bit on and then get buy-to-let for the old one?

[Scrag Meister]

Does depend on the lender, my wife had no problem getting consent to let from Northern Rock a few years ago on her flat. I however have a mortgage with C&G and they would not consider it, and would need to switch to a BTL mortgage.

I'm a contractor so can afford to have a spare house in Devon.

Had to wait til I had 2 years of accounts before the major high street lenders would consider me.
Not hard to get a mortgage, just hard to get a reasonable rate.

GL in your search.

P.S. I have a LARGE 4 bed victorian house in Tottenham and that was just sub 400k. Finsbury Park on the other hand 3 bed basement flat, 400k.

Location Location Location as they say.

[psychocandy]

John Yerou, Freelancer Financials. How are you getting on with the mortgage? Have you decided on what route to take.

The correct way to do it is contact your existing lender to get 'consent to let' on your existing home, most high street lenders will allow this. For the new property, you have a number of different options. You can apply for a contractor mortgage through a contractor mortgage specialists like ourselves. But equally, you can be assessed on 2 years accounts if your accounts provide sufficient income for the amount you wish to borrow. There are a number of high street lenders that will also take retained profits into account.

A contractor mortgage is based on your contract rate, no accounts, SA302, tax returns required. A copy of your contract along with bank statements is used to certify your affordability.

I hope this helps.

John Yerou

Hi John,

Not sorted yet. Assuming I could keep existing mortgage as planned, wouldn't any additional borrowing still be limited to what the income multiples decide?

I.e. If I currently borrow £100K and my salary/contract dictates I can borrow £200K max, then my 2nd mortgage can only be for £100K?