Being approved for that third mortgage

Discussion in 'UK Property' started by Chad Niemand, Jun 21, 2018.

  1. Chad Niemand

    Chad Niemand New Member

    Hi guys,

    I simply don't understand how people get approved for mortgages when they have several properties already. I understand that they refinance their existing properties and use that as deposits, as well as use their existing cash flow surplus in order to be approved for more mortgages, but it just doesn't add up fully to me.

    Let me give a simple example so that i can you can understand what I am saying. Using dollars because my keyboard doesn't have a pounds symbol (I am from South Africa). It is quite a long post, I am sorry.

    I hypothetically earn $4620 a month from my job. The bank wont lend me capital than 28% of my monthly salary as mortgage repayments.

    If i buy a house worth $100 000, but get it on auction for $90 000.
    I put a 10% deposit down of $10 000
    I mortgage it for 30 years and have a 10% per annum interest rate and therefore pay $702 on my mortgage a month
    1% per annum estimated maintenance costs of property value which = R1000 and therefore $83.3 per month.
    I pay $200 a month for rates, levies and taxes.

    I rent the place out for $1000 and my expenses are $985.3 so my cash surplus per month is $14.7.

    If this place increases in value by 10% per annum. Then in 2 years the place will be worth $121 000. My rent is now $1200 so my cash surplus is now $214.7
    If i refinance this for 80% of the capital gains, then i will have $16 800 to put as a deposit on my next place.

    If i find a replicate of the first place i bought, then I worked out i will pay $642 a month on my second places mortgage.

    I will get $1000 in rent and my expenses are $925.3 so i have a cash surplus of $74.7 a month.

    I earn $4700 from my job now and have a surplus of $289.4. So my income is $4989.4. The bank will let me pay $1397.03 (28% of $4989.4) in mortgages a month. I currently have credit that costs $1344. That leaves me with $53.03 a month to put to a mortgage. That can get me like a $6000 mortgage.

    It is not possible to get my third mortgage now, despite the extra refinancing i can do to put down a deposit and the cash surplus i have.

    How would i get extra credit from the bank?
     
  2. realdeals

    realdeals Active Member

    Maybe you could switch some of the assets into a company and realise capital gains on a regular basis to retain inside the company and part finance future acquisitions?

    I appreciate it can be harder to get funding for a company but if you were some how able to gift a property to the company (when there is a decent gain) this could be used as collateral? Its difficutl to explain but I know in the UK you can offset the cost of finance (i.e. mortgage interest) against income/profits.
     
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