Buying a flat while renting out existing bungalow - mortgage at 64

Mortgages & Finance
1

I am in a slightly unusual position and not sure where to start with this so apologies if it is a bit long. My husband passed away last year and I own a bungalow outright in County Durham which I have been renting out since March through a letting agent on a 12 month AST. I moved down to be near my daughter in Nottinghamshire and I am currently staying with her but it is not ideal long term, she has two small children and the house is not big enough for all of us really. I have been looking at small one or two bed flats nearby, there are a few on the market around the 130 to 150k mark which would suit me fine. I have about 40k in savings and a widow’s pension of around 14k a year plus I will get the state pension in two years. The rent on the bungalow is 625 a month. What I cannot work out is whether any lender would actually give me a mortgage at 64 with that income, and whether the rental income from the bungalow would count towards affordability or whether they would want me to have a formal BTL mortgage on the bungalow first. I spoke to one broker on the phone who said it was complicated and he would need to look into it, which did not fill me with confidence. I do not want to sell the bungalow if I can avoid it as it is worth more than what I would get for a flat down here and the rent covers itself easily. Has anyone been in a similar situation or know which lenders are more flexible with older borrowers on mixed income.

Thanks

2

One point to be aware of is that if you take out a residential mortgage on the new flat while letting out the bungalow, some lenders will want to see either consent to let from a previous lender (not applicable here as it is unencumbered) or will simply treat you as a portfolio landlord, which triggers different affordability criteria. Your rental income is also taxable and needs to be declared on a self-assessment return if not already. The net rental figure after tax is what most lenders will use for affordability, not the gross 625. Worth clarifying both points with the broker before going further.

3

Thanks @CGT_Watcher that is really helpful and not something I had thought about at all. The bungalow has no mortgage on it so there is nobody to get consent to let from on that side, but I take your point about the new lender wanting to know the full picture. I had been looking at Nationwide for the flat purchase, do you or anyone else know if they are generally reasonable about this sort of setup or would I be better going through a broker?

Thanks

4

Hello Gill, I just wanted to add a thought as your situation has some overlap with ours, though we are coming at it from a slightly different angle. My husband and I have a buy to let in Kent and we have been looking into the various implications of selling versus holding on to it, and one thing that came up repeatedly is that lenders can be quite cautious about applicants who already own another property, even if it is mortgage free.

I am not a mortgage expert by any means, but a couple of people I have spoken to (including our accountant) have mentioned that specialist brokers who deal with later life lending or equity release tend to have a much better grasp of what is available for borrowers over 60. The high street banks can be quite rigid on age limits, but there are lenders who are more flexible if the income picture makes sense.

I hope you find a way through it. It sounds like you have a clear plan and the bungalow being unencumbered is a real strength in your position.

Many thanks and good luck.

5

Thanks @Sparrow_Kent2 that is kind of you. I have actually started looking at a couple of brokers who say they specialise in over 55s mortgages so hopefully one of them can point me in the right direction. The bit I am still not clear on is whether the rental income from the bungalow would count towards affordability or whether lenders just ignore it completely.

Thanks