Mortgages for multiple flats as an investor

[brydustin]

Hey everyone, curious if someone can help us here.

I own multiple properties privately, which I rent out. The banks calculate the affordability against my salary with the hypothetical mortgage rate of 5%.

I want to buy another property but one bank says that my income is not sufficient because of the affordability. It seems to me like they calculate it as if I was living in all of the flats and the income (rent) is not taken into account.

How do others do it? How could I own 20 flats without having to have a 7-figure income from my main job? Do I have to make a GmbH (but then don't the banks want to see the numbers for the last three years?).

I think it is absolutely ridiculous. For example, for one flat I pay 300chf mortgage interest/month which is significantly less than the rent (over 2k/month). If the interest rate would go back to 5% I could also increase the rent. Worst case I could always sell a flat and make multiple 100k. And on paper the banks own the flat anyway.

Curious to hear your thoughts.

 

[candleguy]

@brydustin Something seems odd here. I own multiple properties and the rental income I make has always been counted as additional income. Also, if you have slightly significant savings/securities, the banks look at those too. I don't even work with mortgages any longer. My bank granted me an overdraft which is secured through securities I hold with another provider. Get various offers and negotiate.

If you transfer the properties into a GmbH, you'll likely foot a hefty gains tax bill. This doesn't seem advisable to me. But check it with your tax counsel.

 

[brydustin]

@candleguy Thank you!

I also have savings/securities, but for the affordability calculation they don't take this into account. They only look at my income (my job).

The overdraft thing could work, but one bank charges me 4% on that, which is much higher than let's say a 1.9% mortgage rate for 5 years. Also I could only do that to a certain amount (e.g. 70% of portfolio value).

Transferring existing properties is not an option due to taxes, that I know, thanks.

 

[candleguy]

@brydustin I think you must try and find other offers. Again - not taking rental income and securities into consideration is strange. Pro tip: hit up Comparis to find providers for you. You "pay" with your data, but since most of it is public anyway, who cares?

Re overdraft: That's highly negotiable too, especially the interest rate. But sure, it's always linked to some security value, be it a portfolio or other assets.

 

[brydustin]

@candleguy Thank you so much. I am already talking with multiple providers.

I agree that they should include rent income - in some cases the rent income will be less than the 5% interest, amortisation and maintenance and running costs though. Let's say a 1M apartment with 800k mortgage - the bank calculates the monthly cost at almost 5k. I can't rent it out for 5k.

No idea how they could include securities. I have heard that some banks calculate that at 60% since they could go down but they don't calculate that as income. I could make an argument for dividends (maybe).

Again: thank you! The overdraft option I had not thought of yet.

 

[candleguy]

@brydustin The thought process must come away from income if you have significant other assets. How would retired folks renew their mortgages otherwise? Private banks are often quite a bit more flexible than the likes of Raiffeisen or ZKB.