MarkO

Okay, self-certification is good for self-employed, etc. Usually it just requires a larger deposit, but the rules have changed recently so you have to state an income, although you don't have to provide any proof of it. I think it's so the banks have their backs covered (e.g., if they lend on the basis of you earning 100k, and it turns out you only earn 20k, then their @rses are covered when it all goes pear-shaped).

Bank of Scotland (who I'm with - or was until I sold up 3 weeks ago) require a 15% deposit, and will lend up to 3.5 times your declared salary (or 2.5 times a joint salary) as usual. However, since you don't have to prove the salary, you can 'adjust' the figure you certify to match the overall loan amount/deposit ratio.

For example, if you had a 50k deposit, earnt 50k and and wanted to buy a 200k house, you'd have to certify that you actually earnt ~57k for the figures to work out. However, you would want to be very sure that you can afford such a committment before going ahead. If you couldn't keep up the payments on a mortgage and it turned out you'd lied about your income to the lender with a self-cert mortgage, I suspect the house would be repossesed (without sympathy) quicker than you can say "Oi! Why are you changing the locks on my house?".

As for the renting aspect, you must tell the lender you are planning to do this before you go ahead. If you rent a place on which a lender has a charge, you are legally bound to inform them; doing this from day one would effectively mean a buy-to-let mortgage which would incur a higher interest level (since the risk to the lender of losing the security is higher once a sitting tenant gets in).

What can you afford with a 20k deposit? Well, theoretically, assuming a 15% deposit for a self-certification (as with BoS - it may be different with other lenders) you would be able to borrow about 115k - but only assuming you are earning over 32k....

BTW, all usual disclaimers apply, I am not an expert, your home is at risk if you do not keep up repayments on a mortgage or other charge laid on it, etc., etc. etc.

[Edited by MarkO - 12/4/2002 1:51:55 PM]

MarkO

Okay. Using Bloomberg's mortage calculator, stick in 85k, 5% and 25 years, and it gives a monthly payment of £496. Assuming agent's fees of, say, 10% (I think it's a little higher, depending who you go with) you'll be needing to clear more than £550/month in rent to break even. Now, 5% is a very good rate (I've been with Bank of Scotland for 5 years, and qualify for a loyalty bonus and other stuff, and my rate was 4.9%).

But let's assume, for a minute, that you don't get such a good deal, the economic climate takes a turn for the worse, and rates increase a bit. If you calculate the mortage with 6.5%, you're going to be paying about £575/month, so will need to clear £630/month rent. Are you sure you'd be able to make that? I'm not convinced...

Your best bet is to find a property, speak to ARLA and speak to a lender. I'm only going on my own personal experience here (we considered renting our house before we moved, but it turned out not to be viable, so we just sold out) and may be talking out of my ****....

Edited to respond to your other comment: Buying to let is really a long-term thing. Trying to make money out of it in the short term is a fool's game. Consider this - just the act of buying/selling the property (including agents fees, conveyancing, etc at either end of the ownership period) will cost you around £3-4k in total.

So to make a profit of £5k over 2 years, your property has to make a 5-8k gain in value - that's nearly 10%. Property prices aren't necessarily going to drop hugely, but I wouldn't want to be banking on a rise of that much in the next 2 years - particularly on a 100k property in Southampton. And owning/renting a property for 2 years is a fairly large amount of potential hassle for a 5k profit at the end of it....

[Edited by MarkO - 12/4/2002 2:31:23 PM]

apples24

iTrader: (1)

so basically then its not wort it your saying? you seem to know a lot and im extremely greatful for the help, what would you suggest? deposit more borrow less?? at a push maybe i could put down 25k and maybe a 80k mortgage?

just buy an old council house or 1 bed flat, and rent it funished?

rent myseld rather than a letting agent?


[Edited by apples24 - 12/4/2002 2:46:13 PM]

apples24

iTrader: (1)

ok looking for a mortgage maybe, been told a self certification is the way for me to go as unable to prove income etc, and i here ya just pay a larger deposit and sign to say can afford payments, im looking to probably rent the flat/house straight out but dont know weather or not to declare that as i may need a buy to let mortgage, so may just say gonna live in it then dont due to split with missis or somin, want the mortgage in my name.
whats the best ones?
any advice?
what could i borrow with say a 20k deposit?


can afford 20k deposit (ish)
credit rating is good (think it is anyway have 4 credit cards)

apples24

iTrader: (1)

yea thats a bit of a bummer, idealy id like 100k to seek a property with, so id just have to hand them a cheque deposit and thats it? is there anyway round the buy to let? ie if a say pay a couple months then let it out? how would the bank know anyway? im just thinking it makes the process more complicated.

theroreticly then i can tell them i earn any figure? although im not stupid enough to borrow what i cant afford, although seing as my plan is to let that would cover it anyway?

MarkO

You'll phone them up for a quote, tell them the value of the property, your earnings, state you want self-certification, and how much your deposit is. They'll then agree it (or not) depending on what you've stated.
Absolutely not. The terms of the mortgage will almost certainly state that if you sub-let it without notifying the legal owners (which is the lender, until you've settled the debt, technically) you are in breach of contract and they could reposses the house or take other legal action. Sure, you could not tell them, but is it worth the risk if they find out? Not in my opinion. And waiting a couple of months won't make any difference - you have to notify them of you letting it out even if you're 10 years into the term of the mortgage. That's just the way it works.
Not really. Buy-to-let mortgages are much more common these days, so they won't baulk at you doing it. However, there are complications involved - you'll need to get a registered letting agent (ARLA) to certify that the property could produce enough income to cover the mortgage, agents' fees and sometimes a bit extra too. Without this you won't be able to get a buy-to-let mortgage.
Theoretically, yes. But if you're lying, you're opening yourself up to major problems if you get into difficulties. For example, your exaggeration might void your life cover, leaving the debt unpaid in the event of your death, etc., etc. Adding a couple of thousand to make the figures tie up is one thing, but I get the impression you're talking about massively over-inflating your income to get a bigger property - which would be very risky indeed (particularly given the current economic situation - redundancies left right and centre).
Are you quite sure of that? Where is this property anyway The buy-to-let market is totally over-saturated in most areas of the country nowadays, since so many people have jumped on the bandwagon. Letting rates are down, and many people are bailing out. You really wanted to be doing this 3-4 years ago (or earlier). Are you absolutely sure the income you require will be easy to find in the letting market? If not, you could find yourself saddled with an empty property you can't afford to pay for.

apples24

iTrader: (1)

southampton.

ok i know ya wont know exact figure but rough monthly payment on say i borrow 100k with 15k deposit.??

average 2 bed house down here lets for £450 month, my cousin has a crappy 3 bed and he pays 650 month.

although my plan would be to sign it over to a letting agence so naturally would recieve a tad less.

apples24

iTrader: (1)

i do have a good income but dont want the over head of the mortgage, just seeking to let it out for a couple years and re-sell.

apples24

iTrader: (1)

what as in the lettin agent would need to charge £630 a month? to cover my mortgage payment once they deducted there cut?

i see your point and your very helpfull, i know the fees those agencies charge for rent on a place is high, so maybe a house would fetch that but thats one for investigation i think.

perhaps safer to borrow less and buy a flat or somin...lol

MarkO

Check out the articles:here and here. Lots of good advice in both. They also specify that your rental will have to be more than 100% of the mortgage payments, to take into account maintenance and agents' fees. One article quotes 130%, the other 150%.

apples24

iTrader: (1)

it is a funny game, my mate just got one, bought a 1 bed flat when it hadnt even been built for 89k, self thingy mortgage, put 45k down ( ok i know thats a lot safer)

but the propert is only just nearing completion now and its already worth 20k more.

my parents house went up 50k in just a year, its stupid isnt it

MarkO

Buying new properties almost always gives an immediate profit, 'cos the developers always sell for a competitive price, and also people will pay more for a house which has 'bedded in' and doesn't have builders on site for some months after.

But yes, it's a bizarre market - we made 55% on our house in 3 years. Having said that, unless you do what we've done (relocate from an expensive area to a cheaper area) then you don't really make money at all, since your next property will have increased by precisely the same proportion.....

MarkO

I've no idea. As I said before, I've not done it myself, so I don't really know. Some of the questions are answered on the thisismoney site though.
I doubt it. I suspect there isn't a massive rental market for 1-bed flats or old council houses (but again, I don't know). Oh, and furnished/unfurnished makes little difference to the rental costs - and in some cases unfurnished properties can rent for more than furnished ones.
You'd have to be very brave, and from the questions you ask I suspect you're not experienced enough to 'go it alone'. There's potentially a lot of work involved.

My general opinion would be that you need to research this more carefully - the idea that you can just self-certify a mortgage regardless of your income, snap up a property, rent it the next day for loads of money and sit back and watch your capital investment grow and the rental profits roll in is just a fallacy.

As the saying goes, if you have to ask, you probably can't afford it!

Andrew Timmins

apples24,

There should be no need for you to self-cert your income as the lender will be more interested in the rental income the property generates. Someone like Birmingham Midshires would want the property to generate an income of 125% of the mortgage payment. You only need to prove a minimum income of £10,000 per year.

If you want any help or information then either ask here or mail me.

Andrew
Mortgage Broker

apples24

iTrader: (1)

hi, trouble i have is proving my income, being a motor trader and a international drug baron :-)
seriously though i know what i can comfterbly afford if i had to pay it myself and live in it if it all went **** up.
but i have been told the only thing realisticly available to me is an self cert mortgage

MarkO

Oooh, look out - somebody who might actually know what they're talking about, instead of just making it up as they go along like me.

Out of interest, Andrew, how did I do? Any major gaffs?

Andrew Timmins

apples24,

Do you, or have you owned property in the past? Buy to let mortgages tend not to be available to first time buyers. If you need to you could always buy on a self cert mortgage then remortgage to a buy to let deal, could be a lot of hassle for you though.

apples24

iTrader: (1)

no neverhad one before, im looking to get into the property ladder as ive been putting it off for ages, seems to be the longer i leave it the worse it gets.

i have the deposit in cash and need advice how to get in.

Andrew Timmins

MarkO,

No major gaffs that I noticed.

The trouble is all lenders ask for different information. For example, one lender may require six months bank statements even on a self cert mortgage, but no P60 or payslips. Another lender may only need a copy of your passport and a utility bill to prove name and address.

Buy to let should be less of a problem as when a survey of the property is done an estimate of monthly rental income is calculated too. This is the income figure the lender is most interested in, not that of the "landlord". As for not using a letting agent, many lenders insist on a letting agent in their terms and conditions.

Andrew

MarkO

Yeah, because they've been competitive (rates wise) and offered good service, we've ended up sticking with BoS for the last 5 years. So I'm probably biased towards their rules and regs.

Andrew Timmins

apples24,

AS MarkO says Bank of Scotland are a good choice, also try Royal Bank of Scotland and Northern Rock. This is for self cert, first time buyer. You can always rent out a room in your house if you want to, no tax to pay on income upto £4,250 per annum.

With a £20,000 deposit you should be able to buy a £100,000 house without too much of a problem.