This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Summary of the case
- Buy to let remortgage
- Capital raising for £29,000 debt consolidation
- Recent missed mortgage payment
- Client living in property
What we achieved for the client
- Overcame the recent missed mortgage payment
- Overcame that the client had not yet moved out of the property
- Raised capital for debt consolidation into one manageable payment route
- Overcame tight rental calculations with top slicing solution
The challenges of the case
The client for this case wanted to remortgage a property onto a buy to let mortgage, whilst it was currently the client’s home. They owned another property, which they intended to move in to, but at the time of our first discussions, there were tenants in situ.
The client was waiting until the notice period was up before gaining possession of the property in order to move into it.
Typically, buy to let mortgage lenders will not accept a case where the person named on the buy to let mortgage is still living in the property. This is because it could be a sign that the applicant has no intention of letting the property, which would be in breach of the terms of the mortgage. Most lenders will want to see the property is already rented to a third party tenant.
In this case, the lender was happy to accept that the client was moving out into another property.
The reason for the remortgage was to pay off debt, from credit cards and a loan. So, the client was looking to raise capital from the property they were living in to do this, and then move into a second property they owned.
Overcoming a recent missed mortgage payment with a buy to let application
There were a couple of reasons why raising the funds presented a challenge.
Firstly, the client had missed a mortgage payment 6 months prior to speaking with us. For any mortgage lender, including for buy to let, this poses an element of risk to a case. This is because anyone borrowing who has been unable to keep up payments on a loan may be vulnerable to facing the same challenges in the future.
Of course, it may be that the circumstances which led to this were temporary, but regardless, when comparing two like for like applications where this was the only difference, many lenders would not accept what would be assessed as a recent blip on an applicants credit history.
Our advisor overcame this by researching lenders who offer greater flexibility on applicant’s credit histories. When the advisor pursued a decision in principle, the lender picked up this factor within the application and it was manually assessed by the lender for its viability and approved.
Using top-slicing to overcome tight rental coverage within the affordability calculation
Our second challenge, on raising the necessary funds, was that the rental calculation for the security property was very tight. This meant that rental income alone did not support the affordability calculation, for the borrowing the client needed.
Our advisor overcame this by looking for lenders who could offer the client ‘top slicing’.
This is where a lender will consider an applicant’s surplus personal income, to support a mortgage affordability calculation.
Some lenders will offer top slicing, because they are happy to accept that, were tenants to stop paying rent in order to cover the mortgage payment, the mortgage holder could and would use their personal income in the interim to keep up mortgage payments.
This is a very useful area of criteria for many applicants whose rental income is low, but who have excess personal income.
In this case, our advisor was able to raise capital up to 75% loan to value which generated the full sum the client needed to pay their outstanding debts from credit cards and a loan.
If you want to remortgage a buy to let property and have experienced blips on your credit history we may well be able to help and raise capital for you too.
Get straight through to an advisor by calling our freephone number above, or enquire online.
Think carefully before securing other debts against your property. Your property may be repossessed if you do not keep up repayments on your mortgage.
By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt.